MASTER 
NEGATIVE 

NO.  95-82338- 6 


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Author: 


New  York  (N.Y.),  Mayor's 

Central  Purchasing... 


operative  centralized 
purchasing  in  the  city... 

Place: 

[New  York] 

Date: 

1915 


^5  -SZ3^%-C 


MASTER  NEGATIVE  « 

COLUMBIA  UNIVERSITY  LIBRARIES 
PRESERVATION  DIVISION 


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K48         New  York  {City)  Mayor's  central  purchasing  committee. 

Co-operative  centralized  purchasing  in  the  city  of  New 
York.  Eesults  of  a  year's  practical  test  of  central  pur- 
chasing in  the  mayor's  departments,  conducted  by  the 
Mayor's  central  purchasing  committee.  rNew  York, 
Press  of  C.  S.  Nathan,  inc.]  1915. 

49  p.    fold,  tables,  fold,  diagrs.  25i"". 
Henry  Bniere,  chairman. 

Wr"  ^^<^^)r^*<;f  v|d^Partments-Eqm^^^^  and  supplies. 

16-1415 

Library  of  Congress  JSI234.A15P8 


RESTRICTIONS  ON  USE: 


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FILM  SIZE:  ^Jjh-i   REDUCTION  RATIO:  '  2  =<  IMAGE  PLACEMENT:  lA  (ha)  IB  IIB 

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4V 


THE  FINANCES  AND 
FINANCIAL  ADMINISTRATION 
OF  NEW  YORK  CITY 

BECOMMENDATIONS  AND  BEPORT  OF 
THE  SUB-COMMITTEE  ON  BUDGET, 
FINANCE,  AND  REVENUE,  OF  THE  CITY 
COMMITTEE  ON  PLAN  AND  SURVEY 

HERBERT  H.  LEHMAN 
Chairman 

Lindsay  Rogers 
HowABD  Lbs  McBain 
R<»BiKr  Mtibbat  Haio 

ComulkmU  to  the  Sub-coumiUtee 


NEW  YORK 
COLUMBIA  UNIVERSITY  PRESS 

1928 


Omtmamt  1928 
Br  HmrarH.  LnfAN 


PftMOf 

J.  J.  Little  &  Ives  CoaqMuoar 
McwYoriL 


FOREWORD 


When  the  Sub-committee  on  Budget,  Finance,  and  Hevmie  was 
organized  in  December,  1926,  it  was  agreed  that  before  we  could 
formulate  any  recommendations  we  must  have  before  us  certain 
data  on  the  problems  falling  within  our  terms  of  reference.  This 
material,  the  Sub-committee  decided,  should  include:  (1)  a  de- 


w 

m 

fiT 

City  of  New  York;  (2)  memoranda  on  previous  recommendations 
by  committees  similar  to  ours;  and  (3)  in  connection  with  the 
problem  of  new  sources  of  revenue,  an  analysis  of  some  recent 
important  developments  in  European  municipal  finance.  With 
the  permission  of  the  Sub-ccnnmittee  I  ^trusted  the  task  ctf 
directing  the  preparation  of  this  material  to  Dr.  Lindsay  Rogers, 
Professor  of  PubUc  Law  in  Columbia  University. 

Dining  the  siunmer  and  autumn  months  the  proofs  of  the  sur- 
vey of  "The  Finances  and  Financial  Administration  of  New  York 
Cily "  were  eirculated  among  the  members  and  were  discussed  at 
a  full  meeting  of  the  Sub-committee.  Thereafter  the  draft  rec- 
ommendations which  follow  were  formulated  in  frequent  consul- 
tation with  a  group  of  the  members  of  the  Committee.  In  the 
preparation  of  these  recommendations  we  have  had  the  able  as- 
sistanee  of  Pntfessors  Lindsay  Rogers,  Howard  Lee  McBain  and 
Robert  M.  Haig,  all  of  Columbia  University,  to  whom  the  Com- 
mittee and  I  are  under  much  obUgation. 

I  feel  confident  that  those  who  read  the  following  pages  will 
find  therdn  an  adequate  explanation  of  the  delay  in  the  formula- 
tion of  the  Sub-committee's  recommendations.  The  matters 
dealt  with  are  extremely  complicated  and  puzzling.  No  ftimilftr 
study  of  New  York's  finances  has  been  attempted  before,  and  even 
with  hdpf ul  and  genmyus  eo5peration  f nnn  city  officials  it  was 
not  possible  to  arrange  for  an  earlier  publication  of  the  report. 

Hbbbbbt  H.  LraiiAN, 

Chairman. 

••• 

m 


MEMBERS  OF  THE  SUB-COMMITTEE 


Adamson,  Robert 
Allen,  Frederic  W. 
Ames,  Edwin  A. 
Ashforth,  Albert  B. 
Baker,  Stephen 
Baldwin,  LeRoy  W. 
Barrett,  Edw.  F. 
Becker,  C.  Adelbert 
Blodi,  Maurice 
Boardman,  William 
Borgstede,  John  G. 
Bosdien,  Fred. 
Brady,  Nicholas  F. 
Bridgman,  Edward  C. 
Bright,  Lcniis  Y. 
Childs,  Richard  S. 
Clark,  Archibald  D. 
Clarice,  Lewis  L. 
Cleveland,  Grover 
Conroy,  James  H. 
Gourtn^,  William  C. 
♦Crane,  Clarence  A. 
Cunningham,  Frank  A. 
Curtin,  John  J. 
DeMoti,  Harry  M. 


Egan,  James  F. 
Eisner,  Mark 
EUiman,  Douglas  L. 
Frankel,  Dr.  Lee  K. 
Frankenthaler,  Alfred 
Fraaee,  H.  H. 
Freschi,  John  J. 
Frew,  Walter  E. 
Erost,  LeRoy 
Galla^r,  Frank  A. 
Giannini,  Attilo  H. 
Goldfogle,  Heniy  M. 
Guinsburg,  Henry  A. 
Harris,  Overton 

Hatch,  Edward,  Jr. 

Hirsehman,  Stuart 

Hurd,  Richard  M. 

Ingram,  A.  0. 

Kahn,  Otto  H. 

Kenny,  Wm.  F. 

Kieran,  James  M. 

Kingeiley,  Darwin  P. 

Koelsch,  Wm.  F.  H. 

McGuire,  Lawrence 

McTfliigblin,  George  V. 


Man,  Alrick  H. 
Metz,  Herman  A. 
MitcheU,  C.  Stanley 
Namm,  Benjamin  H. 
Oestreicher,  Sylvan 
Page,  WiUiam  H. 
PkffBons,  EdgOTtcm 
Potter,  William  C. 
Quigley,  WiUiam  F. 
Bamsay,  Claienoe  J. 
Ricks,  Jesse  J. 
Biordan,  James  J. 
Boulston,  TlKmiaB  H. 
Rowley,  Paik  A. 
Sabin,  Charles  H. 
Bchulti,  Jo0^ 
Schwab,  Joseph  S. 
Seligman,  Edwin  R.A. 
Sessa,  Jo0^ 
Shientag,  Bernard  L. 
Straus,  Dorothy 
Williams,  H.  Pushae 
Wolknitz,  Ernest 

Ldunan,  Herbert  H., 
Chairmm 


ACKNOWLEDGMENTS 


It  is  not  easy  to  apportion  credit  for  the  various  chapters  of 
this  volume.  In  most  cases  the  authors  were  several,  and,  as  the 
text  now  stands,  after  considerable  editing,  responsibility  is  some- 
what confused.  Contributors  to  the  different  chapters  were  as 
follows: 

Chapter  I,  The  Fiscal  Structure,  Mr.  Joseph  McGoldrick,  of 
the  Department  of  Public  Law,  Columbia  University;  Chapter  II, 
Expenditures,  Mr.  McGoldrick,  Dr.  Luther  Gulick,  Lecturer  on 
Municipal  Administration,  Columbia  University,  and  Director  of 
the  Institute  of  Public  Administration,  and  Mr.  A.  E.  Buck  of  the 
staff  of  the  Institute;  Chapter  III,  Salaries,  Mr.  R.  0.  Beckman, 
Examiner,  Civil  Service  Commission,  Cincmnati,  Ohio,  and  Dr. 
Gulick;  Chapter  IV,  Purchasing,  Mr.  Russell  Forbes,  Lecturer  on 
Municipal  Government,  New  York  University,  and  ex-Secretary 
of  the  National  Association  of  Purchasing  Agents;  Chapter  V, 
Revenues,  Dr.  Gulick  and  Mr.  Beckman;  Chapter  VI,  Taxes  and 
Assessments,  Mr.  McGoldrick  and  Dr.  Gulick;  Chapter  VII,  Debt 
(in  part),  Dr.  Paul  Studensky,  Lecturer  on  Public  Finance,  New 
York  University,  and  Chapter  VIII,  Subway  Finance,  Dr.  John 
Dickinson,  Assistant  Professor  of  Politics,  Princeton  Univeraty. 

Appendices  B,  C,  and  D  were  prepared  by  Mr.  McGoldrick; 
Appendk  H  by  Mr.  Ernest  Willvonseder,  C.P.A.,  New  York 
City;  Appendix  J  by  Mr.  William  Watson,  of  the  staff  of  the  In- 
stitute of  Public  Administration;  and  Appendix  R  by  Dr.  Robert 
M.  Haig,  PlxxfesBor  of  Business  Organization  and  Dr.  Donald  H. 
Davenport,  Assistant  Professor  of  Business  Statistics,  of  Columbia 
University.  The  Sub-committee  also  had  before  it  memoranda 
(not  published  here)  relating  to  recent  developments  of  municipal 
finance  in  foreign  countries.  These  were  pr^>ared  by  Dr.  George 
Bielahowsky ,  and  by  Miss  Sarah  Greer,  of  the  staff  of  the  Institute 
<rfPabUcAd]  mmstration. 


vi 


Acknowledgments 


The  original  outline  of  the  main  Report  was  prepared  by  Dr.. 
GulkdL  The  jdnt  authorship  of  the  first  draft  of  the  manuscript 
made  rather  severe  editing  necessary.  In  this  task  I  had  the 
able  assistance  of  Mr.  McGoldrick.  Mr.  Carlos  L.  Israels,  of 
the  Columbia  Law  School,  and  Miss  Vera  Mikol,  who  were  my 
seeretaries,  helped  materially  with  the  editing.  All  of  the  proofs 
wcro  road  by  Dr.  Howard  Lee  McBain,  Ruggles  Professor  of 
Constitutional  Law  m  Columbia  University,  and  by  Prctfessor 
Haig  and  Professor  Dickinson.  Their  valuable  criticisms  resulted 
in  many  improvements  in  the  text  of  the  report. 

While  this  Report  was  prepared,  so  to  speak,  on  the  outside,  its 
authors  were  nevertheless  able  to  avail  themselves  of  the  assist- 
ance of  a  number  of  city  officials.  Former  Commissioner  of  Ac- 
counts Joseph  A.  Warren  and  the  present  Commissioner  of 
Accounts  James  A.  Higgins  have  acted  as  general  secretaries  of 
title  Ccnnmittee  on  Plan  and  Survey  and  have  been  very  helpful. 
On  specific  subjects  the  fdlowing  (ffieials  have  been  ci  mudi 
assistance: 

Budgetary  Procedure:  Peter  J.  McGowan,  Secretary  of  the 
Boaid  (rf  Estimate,  Charles  L.  Kohler,  Director  of  the  Budget, 
James  P.  Diwer,  Duector  of  Investigations  of  the  Board  of 
Estunate,  and  Messrs.  Thomas  P.  Smith,  Jr.,  Joseph  Eustace 
and  Paul  Loeser,  Examiners  of  the  Board  of  Estimate;  Salaries: 
Thomas  C.  Murray,  Director  of  Examinations  of  the  Civil  Service 
Cmnmission,  and  William  O'Connell,  Examiner  <rf  the  Board  of 
Estimate;  Purchasing:  Frazee  L.  Belknap,  Assistant  Engineer, 
Department  of  Purchase;  Debt:  Duncan  Maclnnes,  Chief  Ac- 
countant of  the  Department  of  Finance;  Revenues  and  Assess- 
m^ts:  Edward  J.  Flynn,  City  Chamberlain,  Henry  M.  Goldfogle, 
Piesidmt  the  Board  ci  Taxes  and  Assessments,  and  Richard  J. 
Delehanty,  Chief  Deputy  of  Real  Estate  of  the  Board  erf  Taxes 
and  Assessments.  Mr.  John  H.  Delaney,  President  of  the  Board 
erf  Transportation,  was  also  consulted  frequently.  The  fact  that 
these  officials  gave  genaxras  assistance  to  theSub-conunitteedoes 
not  imply  that  they  approve  of  the  R^x>rt's  conehisioius. 

The  first  draft  of  this  Report  was  in  galley  proof  for  three 
months,  and  revised  proofs  were  subject  to  correction  for  four 


Acknowledgments 


months  before  they  were  paged.  Before  the  Report  was  ready 
for  pubUcation  the  figures  of  the  1928  Budget  were  available.  It 
was  not  considered  possible,  however,  to  substitute  them  for  the 
1927  figures,  except  in  cases  where  there  have  been  changes  of 
procedure.  The  1927  figures  are  just  as  forcible  in  illustrating 
the  matters  to  which  the  Report  calls  attention. 

The  proofs  were  submitted  to  all  of  the  gentlemen  mentioned 
above  and  many  corrections  and  suggestions  were  received.  Mr. 
Maclnnes  was  good  enough  to  have  his  staff  check  all  the  figures 
so  far  as  they  were  comparable  to  the  figures  i^pearing  in 
Comptrollers'  Reports.  Especially  valuable,  homever,  were  the 
painstaking  criticisms  of  Mr.  Thomas  P.  Smith,  Jr.,  who  gave 
imstintingly  of  his  time  and  who  made  available  to  the  staff  of 
the  Sub-committee  his  exceptional  knowledge  of  the  city's  fiscal 
structure.  This  prolonged  and  meticulous  serutiny  by  many 
persons  has  probably  not  eliminated  all  errors,  but  it  is  reasonable 
to  hope  that  it  has  kept  them  from  being  numerous. 

Lindsay  Rogers. 

Columbia  Universily, 
April  1,  1928. 


TABLE  OF  CONTENTS 


L  RECOMMENDATIONS 
A.   The  Budqbt  Problem 

PACU 

Change  of  the  Fiscal  Yeab  

The  Mayor's  Responsibility  for  the  Budget 

Proposal   xvi 

Content  and  Form  of  the  Budget   xix 

Revenue  Items  

Departmental  Totals  

Form  of  the  Budget   

Terms  and  Conditions  of  the  Budget   xxiii 

Accruals   jodv 

Reduction  of  Special  Revenue  Bonds   xxiv 

Snow  Removal   xjdv 

Claims  and  Judgments   xxv 

FiBB  Department  Relief  Fund  .......  jocvi 

Transit  Commission  ,    .  xxvi 

Board  of  TRANSPiMirrATiON  .    .   xacvi 

Armory  Board   xxvii 

Voting  Machines.   xxvii 

Capital  Outlay  Programme   xxviii 

AcQinsmoNs  of  Land   xziz 

Salaries   xxxi 

Purchasing   xxxii 

Property  Accountability   xxxiii 

• 


X 


Table  of  Contbmib 


B.   The  Revenue  Psobleii 

Probable  Future  Financial  Needs   zndy 

EamiATB  Based  on  Recent  Budget  Growth  .    .    .  xxxiv 

Public    Improvements    Excluding  Subwat&— Budget 

Effect   „__» 

  XjuuX 

Subway  Pinancb— Budget  Effect   ^1 

Probable  Future  Coubse  of  Assessed  Valuations  .    .  xliii 

Adequacy  of  the  Property  Tax  to  Solve  the  Revenue  Prob- 

^   xly 

Possible  Additional  Sources  of  Revenue   j 

General  Considerations   j 

The  Real  Estate  Tax   lii 

The  Direct  State  Tax  on  Real  Estate  ....  m 

^^■ciAL  Assessments  

The  Pricing  of  City  Services   |yj| 

  llX 

Gasoline  Tax   ^ 

Tax  on  Unincorporated  Business  and  Aboution  of 
Personal  Property  Tax  

The  Proposal  for  a  Tax  on  Out-of-Town  Visitors  .  bdi 

Readjustment  op  Local  Share  in  Various  State-wide 

Taxes     •    .    .    .    .  i  •• 

  1X11 

Ttm  Assessment  op  Real  Estate  

Sepabatb  Tax  Bills  fob  Education  .......  ixviii 

Tbe  Constitutional  Ten  Per  Cent.  Debt  Limit  ...  box 


Table  of  Contents  xi 
n.  REPORT 

CHAPTEB 

L  The  Fiscal  Stbuctubb  of  New  York  Cnr     ...  l 

II.  The  Planning  of  New  York  City's  Expenditures  .  37 

nr.  New  York  Cnr's  Expenditubes  for  Salaries     .    .  76 

rV.  New  York  City's  Purchasing  Agencies  and  Methods  103 

V.  The  Revenues  of  New  York  Cmr   i3x 

VI.  The  Assessment  of  Property  for  Taxation  and  Spe- 
cial Assessments   168 

Vn.  New  York  City's  Debt  Policies   135 

VIIL  Subway  Finance   222 

APPENDICES 

APPENDIX 

A.  Bbdbf  Financial  Statement  of  New  York  City,  1926  .  248 

B.  Growth  op  New  York  City's  Budget,  1838-1927  .    .  256 
Tax  Budget  Appbopbiations.  Selected  years  1915- 

1«27   257 

D.  Depabtmbmtal  Appbopbiations,  New  Yobk,  1926  .    .  260 

E.  Terms  and  Conditions,  Budget  fob  1927    ....  264 

F.  Mandatory  PoimoNS  of  the  Budget   271 

G.  Work  Programme  Budget— 1914  Experiment  .    .    .  272 

H.  Financial  Requirements  OF  THE  City  OF  New  York  for 

Pbbmanent  Improvements  as  of  January  2,  1927  .  279 

I.  Digest  of  Official  and  Unofficial  Recommendahonb 

Rxlatino  to  the  Bxtdgetary  Procedure  op  New 

York  City   290 

J.  Cash  Receiptb  of  the  City  of  New  York,  fob  the 

TEARS  1915,  1918,  1921,  1924,  1925,  1926      ....  295 

K  Detailed  Classification  of  Sources  of  Receipts  of 
New  York  City  

L.  Licenses  and  Permits  in  New  York  City  ....  319 


xii  Table  of  Contents 

M.  Digest  op  Official  and  Unofficial  Reports  since 

1905,  Relating  to  Revenues  of  New  York  Cnr  .  326 

N.  FuNBBD  Indebtedness  and  Assessed  Valuations  op 
Real  Estate  of  the  City  of  New  York  from  1830 
TO  1927   336 

O.  Constitutional  Debt  and  Tax  Limits  Imposed  on 

Cities  in  New  York  State   339 

P.  Calcui^ation  of  the  Debt-Incurring  Power  .  .  .  342 
Q.  Comparative  Tables  of  the  Finances  of  the  Ten 

Laboest  Cmss  in  the  United  ^ates   344 

R.  Future  Course  of  Assessed  Valuations    .    .    .    •  348 

S.  A  Selected  Biblioobapht   352 


I.  RECOMMENDATIONS 


A.  THE  BUDGET  PROBLEM 


A  segregated  budget  allocating  a  half  billion  dollars  in  thou- 
sands of  Unes  covering  several  hundred  pages  is  a  formidable 
document.  This  is  inevitable.  It  is  nevertheless  the  only  photo- 
graph of  the  city's  activities  as  a  whole  that  is  ever  struck.  It 
ouf^t,  thmfore,  to  be  as  realistic  and  as  complete  a  picture  as 
possible.   It  certainly  can  be  made  more  realistic  and  complete 
than  it  is.  The  elected  officials  who  adopt  the  budget  seldom  have 
any  expert  personal  knowledge  of  the  city's  finances.  They  need  all 
the  information  they  can  get.  The  public  also  needs  all  possible 
information.  Nobody  imagines  that  the  budget  document,  what- 
ever its  form  and  content,  will  be  popularly  consumed.   But  it 
ought  to  contain  all  the  information  that  is  required  for  intdli- 
gent  press  comment  upon  its  salient  features.  It  should  not  be  a 
documfflit  the  witire  inwardness  of  which  is  intelhgible  to  only  a 
few  experienced  budgetary  ferrets.   Such  it  is  at  present. 

Before  considering,  however,  specific  changes  in  the  form  and 
content  of  the  budget  your  Committee  reconmiends  first  a  change 
in  the  date  of  the  fiscal  year,  and  second  a  relocation  of  respon- 
sibility for  the  preparation  and  presentation  of  the  budget. 

Change  op  the  Fiscal  Ysab 

The  fiscal  year  is  now  identical  with  the  calendar  year.  As  a 
result  the  detailed  work  of  preparing  and  examining  the  depart- 
mental estimates  falls  in  the  summer  months — the  period  of  vaca- 
tions. This  is  highly  mconvenient.  The  city's  fiscal  year,  like  that  of 
the  national  and  state  governments,  should  run  from  July  first 
to  June  thirtieth.  The  budget  dates  should  be  as  follows: 

February  1— Last  date  for  filing  departmental  estimates 
with  the  Dhwtor  of  the  Budget.  If  the  estimate  of  any  de- 
partment is  not  filed  by  this  date  the  appropriation  of  the  pre- 

xiii 


xhr 


New  York  City's  Finances  and 


ceding  year,  if  and  as  modified,  shall  be  taken  as  the  estimate 
for  that  departm^t. 

March  1— Last  date  (as  at  present)  for  the  Board  of  Taxes 
and  Assessments  to  certify  the  assessment  rolls  to  the  Board 
of  Aldermen.  Last  date  also  for  the  Comptroller  to  file  his 
estimates  of  the  several  revenues  which  go  into  the  General 
Fund. 

March  15— Last  date  for  filing  supplonentary  or  mandatory 

departmental  estimates.  The  practice  of  submittmg  these 
during  ahnost  the  entire  period  of  budget-making  should  be 
abolished. 

April  1— Date  <m  which  the  Mayor  shall,  ash^rdnaftwreconir 
mended,  present  his  proposed  budget  to  the  Board  of  Estimate. 

April  20 — Last  date  for  increasing  but  not  decreasing  items 
in  the  budget.  Between  this  date  and  April  30  taxpayers'  hear- 
Ingn  shall  be  held. 

April  30— Last  date  for  final  adoption  of  the  budget  by  the 
Board  of  Estimate. 

May  5 — Last  date  for  the  submission  of  the  budget  to  the 
Board  of  Aldermen  and  its  publication  in  the  City  Record. 

May  25 — ^Last  date  for  final  adoption  of  the  budget  by  the 
Board  of  Aldermen. 

June  30— Last  date  for  the  filing  of  the  budget  in  the  office 
of  the  Comptroller. 

July  3 — ^Last  date  for  fixing  the  annual  tax  rates  by  the 
Board  of  Aldermen. 

This  arrangement  of  dates  speaks  for  itself.  It  follows  closely 
in  the  first  half  of  the  year  the  arrangement  of  budgetary  dates 
which  now  falls  in  the  second  half  of  the  yeai^running  from 
August  1  to  December  3L  The  chief  differences  would  be  (1) 
that  the  tax  assessments  and  the  estimates  of  General  Fund 
revenues  would  be  available,  as  they  should  be,  while  the'budget 
is  in  the  making;  (2)  that  the  approximate  tax  rates  would,  there- 
fore, at  least  be  in  sight  during  this  period,  and  (3)  that  the  tax 
rates  would  be  fixed  immediately  after  the  adoption  of  the  budget 
instead  of,  as  at  present,  three  months  thereafter. 


Financial  Administbation:  Recommendations  xv 

It  may  seem  that  February  1  is  an  early  date  at  which  to  re- 
quire the  filing  of  departmental  estimates  in  a  year  foUowing  the 
election  of  a  new  Mayor  and  the  possible  appointment  of  numer- 
ous new  department  heads.   It  would  be  impracticable,  however, 
to  put  this  date  one  month  later.   In  the  proposed  dates  there 
appears  to  be  a  "waste"  period  between  May  25,  the  date  of 
final  adoption  by  the  Board  of  Aldermen,  and  June  30,  the  end 
of  the  fiscal  year.   But  this  period  is  necessary  for  the  possible 
operation  of  the  Mayor^s  veto  power  upon  the  reduction  of  items 
by  the  Board  of  Aldermen  and  tiie  action  of  the  Board  erf  AlAet- 
men  in  overriding  such  vetoes.  True,  this  feature  of  the  budget 
process  has  not  actuaUy  operated  for  many  years.    It  should 
nevertheless  probably  be  preserved  as  your  Committee  will  pres- 
ently  point  out. 

The  period  of  transition  from  the  old  to  the  new  fiscal  year 
would  not,  we  believe,  present  too  great  difficulties.   Under  the 
present  schedule  of  dates  a  budget  could  be  made  for  the  first 
SIX  months  of  the  ensuing  calendar  year.   Taxes  could,  as  now 
be  levied  m  March,  the  whole  payable  in  May,  to  meet  that  bud- 
get   The  rate  would  be  approximately  half  of  what  it  would  be 
If  the  budget  were  for  a  fuU  year.  Another  budget  for  the  full 
new  fiscal  year  (July  1  to  June  30)  could  be  made  during  this  halfl 
year  period  m  the  spring,  foUowing  the  schedule  of  dates  mdi- 
cated  above.   The  tax  rates  would  be  fixed  early  m  July.  The 
first  half  of  these  taxes  would  be  payable  in  November,  as  the 
second  half  now  is,  and  the  second  half  would  be  payable  in  Mav 
as  the  first  half  now  is. 

This  change  of  the  fiscal  year  would  necessitate  a  change  also 
m  the  tune  at  which  the  CamptraUer's  Report  is  prepared  and  pub- 
iished.  The  preparation  of  this  report  would  fall  in  the  summer 
mstead  of  the  winter  months.  There  would  be  some  disadvantages 
m  this.  Your  Committee  behoves,  however,  that  such  disad. 
vantages  would  be  more  than  offset  by  the  enormous  advantages 
that  would  accrue  to  the  general  process  of  budget-making.  The 
U)mptroUer's  office  might  be  given  three  months,  mstead  of  two 
months,  as  at  present,  for  the  makmg  of  this  report.  The  date 
of  the  report  would  be  October  1. 


xvi  Nbw  York  City^s  Finances  and 

The  Mayor's  Responsibility  for  the  Budget  Pboposal 

In  legal  theory  the  Board  of  Estimate  "prepares"  the  budget 
and  presents  it  to  the  Board  of  Aldermen  for  consideration  and 
adoption.  The  Board  of  Estimate  "proposes";  the  Board  of 
Aldermen  "adopts".  It  is  common  to  hear  it  said  that  the  Board 
of  Aldermm  is  the  real  budget-maldiig  authority.  This  is  legal 
fiction.  Apart  from  a  small  amomit  of  publicity  in  respect  of 
a  finished  product,  the  action  of  the  Board  of  Aldermen  upon  the 
budget  is  an  ahnost  futile  gesture.  Indeed,  the  preservation  of 
this  feature  of  the  budget-makmg  process  can  be  justified,  if  at 
all,  chiefly  if  not  solely  upon  the  basis  of  its  possible  «n«rgency 
use.  It  pays  hp  service  perhaps  to  the  ancient  doctrine  that 
the  legislative  body  should  control  the  pubhc  purse  strings.  But 
ewy  observer  knows  that  the  Board  of  Aldermen  does  nothing 
of  thekmd.  The  Board  is  limited  to  reducing  itwns.  This  limi- 
tation on  its  power  to  control  all  but  destroys  the  power  itself— 
except  as  just  mdicated  for  possible  emergency  use.  On  the  othw 
hand,  the  submission  of  the  budget  to  the  Board  of  Aldermen 
does  no  imperial  harm,  so  far  as  your  Ckanmittee  can  see,  and  the 
requirement  should  be  retained. 

Its  retention,  however,  should  not  be  allowed  to  masquerade 
or  obscure  the  undeniable  fact  that  it  is  the  Board  of  Estimate 
that  makes,  and  for  all  practical  purposes,  also  adopts  the  budget. 
This  is  the  legislative  body  that  really  controls  the  purse  strings. 
Incidentally  it  is  no  less  representative  than  is  the  Board  of  Akkr- 
men,  although  the  basis  of  representation  is  different. 

Not  <Hily  is  the  1^  theory  that  the  Board  of  Aldermen  is 
the  rei^nfflble  budget-adopting  authority  belied  by  the  facts, 
but  so  also  is  the  legal  theory  that  the  Board  of  Estimate  "pre- 
pares" the  budget.  The  preparation  of  the  budget  by  a  collective 
body  like  the  Board  of  Estimate  is  an  impossibihty.  The  Board 
ean  do  and  does  nothmg  more  than  revise  a  budget  that  has  been 
prepared  by  someone  else.  At  the  presoit  time  the  mass  of  esti- 
mates that  come  from  the  numerous  departments  and  offices  are 
worked  over  by  the  examiners  of  the  Board  under  the  somewhat 
ill-d^ned  j<»nt  direction  of  the  Director  of  the  Budget,  an  ap- 


FiNANciAL  Administration:  Recommendations  xvu 

pointee  of  the  Mayor,  and  the  Director  of  Investigations,  an 
appointee  of  the  Board  of  Estimate.  It  is  these  officers  who 

prepare  the  budget. 

Your  Committee  is  of  the  opinion  that  responsibihty  for  the 
preparation  of  the  budget  and  its  proposal  to  the  Board  of  Esti- 
mate is  not  sufficientiy  centraUzed.  In  our  judgment,  the  Mayor, 
not  the  Board  of  Estimate,  should  be  responsible  for  the  prepara- 
tion of  the  budget,  and  should  present  it  to  the  Board  of  Esti- 
mate as  his  proposal.  To  this  end  a  Department  of  the  Budget 
should  be  estabhshed  by  local  law.  The  Director  of  the  Budget, 
subject  to  appointment  and  removal  by  the  Mayor,  should  be  the 
executive  head  of  this  Department  and  most  of  the  examiners  and 
some  of  the  engineers  now  under  the  Secretary  of  the  Board  of 
Estimate  should  be  transferred  to  the  Department.  The  tax 
budget  should  be  prepared  by  the  Director  of  the  Budget  and  sub- 
mitted to  the  Board  of  Estimate  by  the  Mayor,  with  a  statement 
or  message  analyzmg  and  outlining  its  more  important  features. 
The  Capital  Outlay  Programme  hereinafter  discussed  should  also 
be  prepared  by  the  Director.  In  short,  all  initial  proposals  of 
financial  eiqienditures  should  pass  under  his  scrutiny  and  then  go 
to  the  Board  of  Estimate  with  the  recommendation  of  the  Mayor. 

Not  the  least  of  the  reasons  for  this  proposal  to  centralize 
responsibihty  for  the  preparation  of  the  budget  und^  the  Mayor 
is  the  existence  of  large  spending  agencies  under  the  Borough 
Presidents.  From  time  to  time  the  proposal  has  been  made  to 
transfer  the  administrative  activities  of  the  Borough  Presidents' 
offices  to  departments  officered  by  appointees  of  the  Mayor  and 
to  confine  the  Borough  Presidents  to  their  functi<ms  as  members 
of  the  Board  of  Estimate  and  Apportionment.  On  this  proposal 
your  Committee  expresses  no  opinion,  for  the  reason  that  it  in- 
volves considerations  that  are  larger  than  merely  fiscal.  The  re- 
lation of  the  Borough  Presidents  to  the  budjget  is,  however, 
probably  the  principal  reason  that  is  advanced  for  depriving  them 
<rf  ihm  administrative  powers.  As  long  as  they  retain  these 
powers  it  is  of  prime  importance  that  their  budget  requisitions 
should  be  examined  and  reported  upon  by  a  department  over 
which  they  have  no  oontroL  As  mmibers  of  the  Board  of  Esti- 


xviii  New  York  City's  Finances  and 

mate  they  would  have  ample  opportunity,  if  need  be,  to  defend 
tiieir  own  reoommendations. 

In  addition  to  the  important  task  of  preparing  the  budget,  oer- 
tain  duties  now  performed  by  the  Board  of  Estimate  could  ad- 
vantageously be  devolved  upon  the  Director  of  the  Budget. 
By  the  Terms  and  Conditions  of  the  Budget  it  is  now  required 
that  the  Board  of  Estimate  shall  approve  every  proposed  contract 
in  excess  of  $1,000  that  is  chargeable  to  the  budget.  Many  such 
contracts  are  relatively  small.  There  is  no  reason  why  the  Direc- 
tor of  the  Budget  should  not  be  authorized  to  approve  contracts 
in  amounts  of  less  than  $5,000.  In  this  ecxnnection,  it  should  be 
noted  that  contracts  for  local  improvements  under  the  direction 
of  the  Borough  Presidents,  which  are  financed  out  of  the  two  re- 
Vfdving  assessment  funds  (the  Street  Improvement  Fund  and  the 
Fimd  for  Street  and  Park  Openings),  are  not  submitted  to  the 
Board  of  Estimate.  The  law  should  require  that  these  contracts 
and  their  specifications  should  be  so  submitted. 

If  lump  sum  appropriations  for  materials,  suppUes,  equipment, 
and  ike  like  are  not  itemized,  as  it  is  heremafter  recommended 
they  should  be,  the  approval  (rf  the  Director  of  the  Budget  should 
also  be  required  for  any  considerable  expenditure  from  such  ap- 
propriations. If  they  are  so  itemized,  his  approval  should  be 
obtained  for  any  subsequent  change.  It  is  often  the  case  that  such 
appropriations  are  used  for  the  extension  or  initiation  of  activities 
and  the  purchase  of  suppUes,  materials,  or  equipment  that  wm 
not  in  contemplation  when  the  appropriation  was  made.  At 
present  there  is  no  satisfactory  check  upon  this  practice. 

The  Director  of  the  Budget  should  aJso,  it  is  believed,  be  em- 
powered to  approve  modifications  in  Personal  Service  salaries 
and  requests  for  the  filling  of  vacancies  at  other  than  the  mini- 
mum rates.  If  he  be  not  so  empowered,  it  should  certainly  be 
provided  that  such  proposals  be  routed  through  his  office  and  go 
to  iJie  Board  of  Estunate  with  the  recommendation  of  the  Mayor. 

The  activities  of  the  Departmwit  of  the  Budget  would  natu- 
rally be  heaviest  during  the  active  spring  months  of  budget-mak- 
ing; but  the  preparation  of  the  Capital  Outlay  Programme  here- 
after outlined  would  daim  its  attention  during  ihb  autumn  and 


Financial  AnMiNismATioN:  RBcoMifBirDATiONB  xix 

winter  months.  In  fact,  the  D^artm^t  would  find  abundant 
work  to  do  at  all  seasons  of  the  year.  Budget-making  in  New 
York  should  be  a  continuous  process. 

In  making  this  proposal  for  a  Mayor's  budget  your  Committee 
is  under  no  delusion  m  respect  of  the  aheady  burdensome  duties 
of  the  Mayor.  If  he  is  made  responsible  for  the  budget  proposal, 
he  will  m  the  nature  of  things  be  compelled  to  rely  heavily  upon  the 
Director  of  the  Budget.  The  success  of  this  proposed  change  will 
depend  in  large  measure,  if  not  entirely,  upon  the  sound  judgment, 
the  eiq>ertne8S,  the  detailed  knowledge  of  the  city's  financial  oper- 
aticms  and  upon  the  courage  of  the  Director.  Needless  to  say, 
it  would  also  depend  in  large  measure  upon  and  be  assured  by 
the  skill  and  competence  of  the  staff  which  would  be  tranrferred 
to  his  Department  from  the  office  (rf  the  Secretary  of  the  Board  of 
Estimate. 

Content  and  Form  of  the  Budget 

For  purposes  of  clarity  the  term  "Mayor^s  Budget^'  is  here 
used  to  designate  the  budget  document  which  it  is  recommended 
shall  be  submitted  by  the  Mayor  to  the  Board  of  Estimate  on 
April  1.  The  term  "Proposed  Budget''  is  used  to  denote  the  same 
document  with  the  alterations  that  have  been  made  by  the 
Board  of  Estimate  prior  to  April  20,  after  which  no  items  may  be 
mcreased.  The  term  "Budget^'  refers  to  the  document  that  is 
finally  adopted  by  the  Board  of  Estunate  on  or  before  April  30. 

Revenue  I  ferns.— When  the  budget  is  under  public  consideration 
by  the  Board  of  Estunate  it  is  highly  desirable,  not  to  say  indis- 
pensable, that  estunates  of  probable  revenues  should  be  available, 
both  to  the  Board  and  to  the  pubUc.  The  Mayor's  Budget! 
therefore,  should  contain: 

(1)  The  Comptroller's  estimate  of  revenues  of  the  General 
Fund  showing  the  source  of  each  revenue  and,  in  paraUel 
<»lumns,  a  comparison  with  the  revenues  of  several  preceding 
years.  It  was  formerly  the  practice  of  the  ComptroUer  to  sub- 
noat  these  estimates  showing  this  comparison.  The  practice 
oiould  be  restored  and  made  mandatory  upon  the  Comptroller. 


XX 


New  Yobk  City's  Financbs  and 


In  this  connection  your  Ck>mmittee  recommends  that  all 
special  revenues,  except  such  as  are  earmarked  for  rinking 

funds,  should  be  abolished.  Such  revenues,  for  example,  as 
the  water  revenues,  bridge  revenues,  antitoxin  fund,  etc.,  should 
be  converted  into  the  Greneral  Fund.  From  the  viewpoint  of 
budget-making  it  would  also  be  advantageous  to  cover  into  this 
fund  the  state  subvention  for  education.  It  is  doubtful,  how- 
ever, whether  the  legislature  could  be  induced  to  enact  a  law 
to  that  end.  It  would  certainly  meet  with  considerable  oppo- 
sition. 

(2)  A  statement  of  the  amount  which  would  have  to  be  col- 
lected in  taxes  to  meet  the  requirements  of  the  Mayor's  Budget. 

(3)  A  statement  of  the  assessed  valuations  as  finally  fixed  by 
the  Board  of  Taxes  and  Assessments  and  confirmed  by  the 
Board  of  Aldennen  in  March. 

(4)  A  computation  of  the  tax  rates  for  the  several  boroughs 
based  upon  these  figures. 

At  the  time  of  printing  of  the  proposed  budget  for  the  taqiay- 
m'  hearings  on  and  after  April  20,  items  two  and  four  should  be 

revised  so  as  to  account  for  the  alterations  made  by  the  Board  of 
Estimate. 

Departmental  Totals. — ^In  connection  with  the  appropriations 
hr  tibe  several  departments  there  are  certain  items  properly 

dhargeable  to  the  departments  which  ought  to  be  indicated  if  we 
are  to  have  anything  like  a  true  picture  of  the  financial  allowances 
that  are  made.  These  are:  Debt  Service  charges;  Eent  charges; 
and  Corporate  Stock  allowances. 

In  the  present  budget  the  appropriati<ms  fmr  Debt  Service  are, 
as  they  should  be,  itemized  in  large  simis  at  one  place  in  the  bud- 
get. They  run: 

''Code  Interest  on  Funded  Debt  of  the  aty  of  New 

TOTk  as  constituted  since  January  1,  1898; 

"Code  3006 — Interest  on  Corporate  Stock  Notes,"  etc. 

Following  the  itemization  of  departmental  appropriations  there 
duNild  be  shown  what  portion  of  these  Debt  Service  items  are 
chargeable  to  each  dQ>artment.  This  diould  be  done  by  using 


Financial  Administration:  EficoMMBNDATiONB  xxi 


the  code  niunber  of  the  Debt  Service  item  followed  by  the  key 
letter  "D"  meaning  distributed,  together  with  the  proper  amount. 
This  would  not  mean  that  this  amount  was  actually  appropriated 
at  this  point  in  the  budget.  It  would  simply  indicate  what  por- 
tion of  the  amount  that  is  appropriated  under  Debt  Service  be- 
longs to  that  d^mrtment.  F^isely  the  same  plan  should  be  fol- 
lowed in  respect  of  appropriations  for  Rent.  For  example,  under 
the  appropriations  for  Personal  Service  and  Other  Than  Personal 
Service  for  the  Department  of  Water  Supply,  Gas  and  Electricity 
there  would  fall  such  items  as  tiiese: 

3005D  Debt  Service,  Permanwit  Debt  Charges  $12,665,168.00 
d022D  Debt  Sa^ce,  Special  Revenue  Bonds .  122,000.00 
3037D  Bent   58,620.00 

Distributed  Amounts— Total   $12,845,788.00 

The  Corporate  Stock  allowance  to  the  departments  should  also 
be  indicated  as  hereinafter  explained.  The  departmental  total 
would  then  consist  of  three  main  items: 

(1)  Tax  levy  allowance; 

(2)  Distributed  amounts; 

(3)  Corporate  Stock  allowance. 

If  the  special  revenue  funds  are  not  abolished  as  above  recom- 
mended there  would  be  for  some  d^artments,  in  addition  to  these 
items,  an  item  indicating  the  special  revenue  allowance. 

Form  of  the  Budget— Your  Committee  recommends  that  the 
budget  document,  from  the  time  of  its  presentation  by  the  Mayor 
to  its  final  adoption,  be  divided  into  three  parta.  Part  I  diould 
consist  of  the  code  items  appropriated,  each  line  canying  a  lump 
sum  appropriation.  Part  II  should  consist  of  the  schedules  in 
support  of  these  code  items.  Lump  sum  appropriations  without 
supporting  schedules  should  be  absolutdy  prohibited,  with  the 
exertion  of  contingent  funds  to  be  expended  with  the  approval 
of  the  Mayor.  All  appropriations  should  by  law  be  required  to 
be  spent  in  accordance  with  the  supporting  schedules.  Part  III 
should  be  the  Capital  Outlay  Programme  hereinafter  described. 

In  the  matter  of  Pmonal  Service  schedules  the  budget  is 


xxii 


New  Yobk  City's  Finances  and 


already  sufficiently  detailed.  In  the  matter  of  Other  Than  Per- 
sonal Service  appropriations  there  should  be  additional  itemiza- 
tion. To  illustrate:  Code  2209  in  the  budget  for  1928  carries  an 
appropriation  of  $85,400  for  Motor  Vehicles  and  Equipment  in 
the  Department  of  Water  Supply,  Gas  and  Electricity.  This  item 
should  have  a  supporting  schedule  which  should  also  indicate  re- 
plaoement  itons.  For  example,  as  followd: 


2209 


Motor  Vehicles  and  Equipment  

General   $15,880 

Automobile,  Touring  (X)   1,700 

Automobile,  Sedan, 

6  at  $1260  (5X)   7^ 

Automobile,  Runabout, 

5  at  $720  (X)   3,600 

Trucks— 1  Ton, 

18  at  $720  (6X)   12,960 

TrudB»— 1  T«i, 

9  at  $850   7,650 

Trucks— 2  Ton, 

12  at  $3000   36,000 


(X) — A  replacement. 


$124,180.00 


Recommended 

BT  MaTOB 


$85,400.00 


If,  after  the  adoption  of  the  budget,  the  department  wishes 
'     '  for  valid  reasons  to  expend  this  money  somewhat  differently, 

the  Director  of  the  Budget  should  be  empowered  to  authorize  a 
i  change,  subject  to  approval  by  the  Board  of  Estimate. 

The  present  form  of  the  budget  document  that  is  used  by  the 
Board  of  Estimate  while  the  budget  is  in  the  making  need  not  be 
described  here;  but  it  is  far  from  satisfactory.  It  is  too  difficult 
to  follow  comparatively.  Your  Committee  suggests  that  the 
Mayor's  Budget  be  set  up  in  the  following  columns: 

(1)  Appropriations  for  the  previous  fiscal  year  as  modified. 

(2)  Expeiditures  for  the  previous  fiscal  year. 

(3)  Appropriations  for  the  current  fiscal  year. 

(4)  Appropriations  for  the  current  fiscal  year  as  modified  to 

I March  1  or  some  other  practical  date. 
(5)  Code  number  and  title  of  appropriation. 


I 


Financial  Administration:  Rbcommendationb  CTiii 

(6)  Departm^tal  request  for  the  ensuing  year. 

(7)  Mayor's  recommendation  for  the  ensuing  year. 

The  proposed  budget  as  fixed  by  the  Board  of  Estimate  on 
April  20  should  contain  an  eighth  colmnn  as  follows: 

(8)  Board  of  Estimate's  recommendatiim  for  the  ensuing  year. 

When  finally  adopted  by  the  Board  of  Estimate  columns  1,  2, 
3,  4,  6,  and  7  would  be  eliminated,  leaving  only  columns  5  and  8. 
During  the  period  of  consideration  by  the  Board  the  title  of  the 
appropriation  would  be  near  the  center  of  the  page  with  pre- 
vious figures  on  the  Mi  hand  side  and  proposed  figures  on  the 
right  hand. 

If  the  budget  document  is  set  up  in  this  form  it  is  manifest  that 
a  comparison  of  present  proposals  with  previous  figures  can  be 
made  at  a  glance.  The  reason  for  columns  1  and  2  is  that  they 
show  the  final  figures  for  an  entire  fiscal  year;  the  picture  is  com- 
plete. It  is  obviously  impossible  to  present  a  complete  picture 
for  the  current  year.  The  amounts  appropriated  do  not  tell  ihe 
whole  story. 

This  set-up  of  the  budget  document  should  be  followed  not 
only  in  Part  I  but  also  in  Part  II  containing  the  fine-by-line  sup- 
porting schedules.  In  the  Personal  Service  items  of  these  sched- 
ules some  difficulty  will  be  ^countered  in  presenting  this  line- 
by-line  comparison  where  modifications  have  been  made  in  the 
previous  or  current  budget  or  changes  are  proposed  in  the  new 
budget  that  affect  the  number  and  titles  of  positions.  Your  Com- 
mittee believes,  however,  that  the  Budget  Director  and  his  staff 
can  in  the  course  of  time  mm  out  this  difficulty  by  the  use  of 
appropriate  devices. 

If  the  fiscal  year  is  changed  as  herein  recommended  there  will 
also  be  difficulties  m  the  transitional  half  year  and  in  the  first 
new  fiscal  year  as  to  the  figures  m  colmnns  1  to  4  and  m  the 
second  new  fiscal  year  as  to  the  figures  in  columns  1  and  2.  Such 
difficulties  are  not,  it  is  beheved,  insurmountable.  They  are  in 
any  event  only  temporary. 

Terms  and  CandiHana  of  the  Budget.— The  terms  and  condi- 
tions of  the  budget  are  a  series  of  descriptive  requirements  which 


xxiy  Nbw  York  City's  Financss  and 

tiie  Board  of  Estimate  lays  down.  The  departments  must  ob- 
serve these  requirements  in  making  their  expenditures  under  the 

authorized  appropriations.  These  terms  and  conditions  are  not, 
however,  binding  upon  the  Board  of  Estimate.  They  should  be 
made  so  by  law.  Moreover,  the  terms  and  conditions  of  the 
budget  shmdd  be  completely  revised. 

Accruals 

Savings  in  Personal  Service  appropriations  which  result  from 
vacancies  in  office  or  from  the  filling  of  vacancies  by  appointments 
at  a  lower  salary  scale  than  that  provided  for  in  the  budget,  are  in 
New  York  budgetary  parlance  known  as  accruals.  In  all  of  the 
departments  employing  a  large  personnel  such  accruals  should  be 
estimated  and  deducted  from  the  departmental  appropriation  in 
the  budget.  It  should  be  provided  by  law  that  all  undeducted 
accruids  should  automatically  go  into  the  Tax  and  Appropriation 
DdSiciency  and  Surplus  Account.  The  practice  of  -  traiuif erring 
such  amounts  to  be  used  for  purposes  not  contemplated  by  the 
budget  nor  considered  at  the  time  of  its  making  should  be  pro- 
hibited. 

Reduction  of  Special  Revenxte  Bonds 

Special  revenue  bonds  are  now  issued  for  certain  ipedfie  pur- 
poses under  authorization  of  Section  188  of  the  Charter  as  well 
as  under  other  state  laws.  There  is  no  question  that  the  need 
for  the  issue  of  these  bonds  can  be  reduced. 

Snow  Renmal. — ^Prior  to  the  budget  of  1928  snow  removal 
penses  have  been  met  wholly  by  the  UBue  of  special  revenue 
bonds.  In  the  budget  of  that  year  there  is  incorporated  an  item 
of  $1,000,000  for  snow  removal  and  an  item  of  $407,400  for  snow 
removal  equipm^t.  The  first  item  was  based  upon  no  kind  of 
eslamate.  Your  Committee  recommends  that  the  budget  in- 
clude an  appropriation  for  snow  removal  based  iQK>n  an  average 
of  expenditures  for  this  purpose  over  a  number  of  years  preceding. 
It  should  be  strictly  required,  however,  that  the  amount  appro- 
priated should  be  used  for  actual  snow  removal  and  not  for  the 


Financial  AnmrnsTRATiON:  Rboommendations  xxv 

purchase  of  equipment.  If  any  equipment  is  needed,  an  appro- 
priation for  this  purpose  should  appear  in  the  budget.  It  should 
also  be  rigidly  provided  that  any  balance  in  this  appropriation 
should  revert  to  the  Tax  and  Appropriation  Deficiency  and  Sur- 
plus Account.  If,  in  the  previous  year,  the  appropriation  proved 
insufficient  and  special  revmue  bonds  were  issued,  the  Debt  Ser- 
vice for  this  purpose  would  be  shown  in  connection  with  the  new 
appropriation,  as  above  indicated  in  respect  of  the  distribution 
of  Debt  Service  generally.  The  change  of  the  fiscal  year  would 
throw  the  expeaditiires  for  snow  removal  in  any  winter  season 
completely  within  one  fiscal  year,  instead  of  in  two  fiscal  years 
as  at  present.  * 

Your  Committee  is  impressed  with  the  need  for  some  furth^ 
check  upon  expenditures  for  snow  removal  We  therefore  recom- 
mend that  a  detailed  report  be  submitted  each  year  to  the  Mayor 
showing  the  cost  of  snow  removal  on  a  cubic  yard  basis,  including 
the  cost  of  overhead  as  well  as  the  cost  of  direct  labor.  These 
unit  costs  should  also  be  compared  with  the  unit  costs  of  pre- 
vious years.  The  requir^ent  of  such  a  report,  it  is  believed, 
would  go  far  toward  correcting  the  loose  use  of  snow-removal 
funds.  The  report  could  not,  of  course,  be  submitted  in  time  for 
consideration  when  the  budget  was  being  made.  It  should,  how- 
ever, be  submitted  not  later  than  June  1. 

'Claiim  and  JudgmetUa.—Fnor  to  the  budget  of  1928  claims 
and  judgments  were  also  paid  wholly  by  the  issue  of  special 
revenue  bonds.  The  budget  of  this  year  includes  an  appropria- 
tion of  $1,000,000  for  this  purpose.  Your  Committee  is  again  of 
the  opinion  that  an  appropriation  for  this  purpose  should  be 
based  upon  an  average  of  expenditures  over  a  niunber  of  years. 

In  this  connection  we  call  attention  to  the  fact  that  the  Comp- 
troller is  authorized  by  law  to  settle  all  claims  and  judgments 
against  the  city.  This  is  a  very  large  power  to  be  placed  in  the 
hands  of  a  single  official.  In  respect  of  claims  exceeding  five 
thousand  dollars  the  Comptroller  should  at  least  be  required  by 
law  to  publish  in  the  City  Record  that  he  has  such  a  claim  under 
consideration.  This  notice  should  be  published  not  less  than  ten 
days  prior  to  the  actual  payment  of  the  claiin. 


zxvi  Nsw  York  City's  Finances  and 

Fvre  Department  Relief  Fund. — ^An  appropriation  for  the  Fiie 
DqMurtment  Relief  Fund  should  be  made  on  the  same  basis  as 

the  appropriations  above  proposed  for  snow  removal  and  claims 
and  judgments. 

Transit  Commission. — The  state  pays  the  entire  expenses  of 
the  Public  Service  Commission  which  performs  for  the  rest  ct  the 
state  functicms  similar  to  those  of  the  Transit  Commission  in  the 
City  of  New  York.  Under  the  Pubhc  Service  Commission  Law 
the  Transit  Commission  may  requisition  the  city  for  appropri^ 
tions  at  any  time  within  its  own  choosing  and  have  its  d^nands 
met  by  the  issue  of  special  revenue  bonds.  There  is  in  this  ar- 
rangement not  only  discrimination  against  the  city  as  compared 
with  the  rest  of  the  state  but  also  a  quite  unjustifiable  imposition 
upon  the  city  in  respect  of  the  manner  in  which  it  is  required  to 
meet  the  eaqienditures  of  this  CcHninis8i0n.  If  the  eHy  is  required 
to  meet  these  expenses  the  Conmiission  should  certainly  be  re- 
quired to  submit  its  detailed  estimates  at  the  regular  time  of 
budget-making  and  have  them  considered  by  the  Mayor  and  the 
Board  of  Estimate  and  adopted  as  are  other  appropriations. 
The  <^mations  of  the  Transit  Ccmmission  are  surely  no  more  in 
the  nature  of  state  functions  than  are  the  operations  of  the  De- 
partment of  Education.  It  would  be  just  as  logical  to  require  the 
city  to  make  a  lump  sum  appropriation  in  any  amount  demanded 
by  the  D^mrtment  of  Education  and  to  meet  the  demand  by  the 
issue  of  special  revenue  bonds  as  it  is  to  vest  this  unlimited  finan- 
cial independence  in  the  Transit  Commission.  In  all  fairness  the 
legislature  should  be  asked  to  amend  the  PubHc  Service  Com- 
mission Law  so  as  to  put  the  appropiiatiiKis  for  the  Transit 
Ccnnmission  either  on  the  state  budget  or  on  the  same  basis  as 
other  city  appropriations. 

Board  of  Transportation. — The  Public  Service  Conmiission 
Law  also  apparentiy  permits  the  city  to  issue  special  revenue 
bonds  for  the  current  expenses  of  the  Board  of  Transportation. 
For  some  years  the  city  has  in  fact  been  including  the  expenses 
of  this  Board  in  the  tax  budget.  It  can,  of  course,  be  plausibly 
argued  that  the  expenses  of  this  Board,  which  is  engaged  exclu- 
sively in  subway  construction,  ^ould  be  a  capitid  charge  against 


Financial  Ahminibtbation:  Recommendations  zxvii 

the  new  subways  and  should  therefore  be  met  by  the  issue  of 
corporate  stock.  Any  proposal  to  defray  these  expenses  out  of 
corporate  stock  is  not  likely  at  the  present  time  to  meet  with 
much  consideration.  Certainly,  however,  the  expenaea  of  the 
Board  diould  be  met  either  out  of  corporate  stock  or  out  of  tax 
appropriations.  The  provision  of  the  law,  which  apparently  per- 
mits the  issuance  of  special  revenue  bonds  for  this  purpose,  should 
be  amended. 

Armory  Board. — ^The  provision  of  the  law  which  has  been  con- 
strued to  permit  the  issuance  of  special  revenue  bonds  for  the 
Armory  Board  should  be  amended  so  as  to  prohibit  this. 

Voting  Machines, — The  purchase  of  voting  machines  for  the 
entire  city  will  probably  be  completed  in  1928.  As  tiie  law  stands 
q>eeial  revenue  bonds  may  be  issued  for  this  purpose.  This  may 
have  been  advisable  at  the  time  of  the  enactment  of  the  law. 
It  should,  however,  now  be  amended.  The  purchase  of  replace- 
ments or  of  additional  machines  in  the  future  should  be  met 
by  appropriations  in  the  tax  budget. 

If  these  proposals  that  the  annual  tax  budget  shall  include 
items  for  the  expenses  of  Snow  Removal,  Claims  and  Judgments, 
Fire  Department  Relief  Fund,  Transit  Commission,  Board  of 
Transportation,  Armory  Board,  and  Voting  Machines  becarried 
out,  the  necessity  for  the  issuance  of  special  revenue  bonds  would 
be  considerably  diminished.  Such  bonds  would  still  be  required 
for  certain  specific  emergencies  such  as  more-than^avmige  snow 
removal,  more-than-average  claims  and  judgments,  more-than- 
average  needs  of  the  Fire  Department  Relief  Fund,  the  condem- 
nation of  unsafe  buildings,  the  payment  of  the  expenses  of  officers 
who  successfully  defend  themselves  against  removal,  and  unfore- 
seen expenses  due  to  contagious  diseases  or  epidemics. 

In  addition  to  these  specifically  named  purposes  the  Charter 
also  authorizes  the  issue  of  special  revenue  bonds  not  in  excess 
of  two  million  dollars  for  general  and  presumably  unforeseen  pur- 
poses upon  a  concurrent  vote  of  the  Board  of  Estimate  and  three- 
fourths  of  the  Board  of  Aldamen.  Your  Committee  is  of  the 
opinion  that  this  amount  should  be  increased  to  three  million 
dollars  in  order  to  give  some  additional  elasticity.  This  is  espe- 


r 


xxviii  New  York  City's  Finances  and 

cially  recommended  in  view  of  the  above  proposal  that  the  transfer 
erf  accruab  be  abolished.  The  issuance  of  special  reveaue  bonds  f<Nr 
any  department  would  show  in  the  budget  of  the  next  year  under 
the  distribution  of  the  Debt  Service,  as  hereinbefore  described. 

Capital  Outlay  Pbogrammb 

Part  ni  of  the  budget  idiould  be  the  Capital  Outlay  Pro- 
gramme. Early  in  the  autumn  the  departments  should  be  re- 
quired to  submit  to  the  Director  of  the  Budget  all  requests  for 
projects  to  be  financed  during  the  next  fiscal  year  (begmning 
July  first)  by  the  issue  of  corporate  stock,  serial  bonds,  or  tax 
notes.  These  should  be  arranged  by  the  departments  in  the  order 
of  their  urgency  from  the  viewpoint  of  the  department.  At  the 
same  time  information  should  be  furnished  as  to  the  state  of  proj- 
ects previously  authorised,  together  with  the  dates  and  amounts 
of  authorization  and  the  unencumbered  balances,  if  any. 

For  completed  projects  the  Mayor  should  recommend  there- 
sdndment  of  such  balances.  If  no  progress  has  been  made  upon 
an  auth<msed  project  the  Board  should  know  the  reason  why  and 
the  Mayor  diould  recommend,  as  the  case  may  be,  rescindment, 
reduction,  or  continuation  of  authorization.  In  every  case,  how- 
ever, positive  action  should  be  taken  by  the  Board.  Authoriza- 
tion of  corporate  stock  or  serial  bonds  which  are  not  in  fact 
needed  ma^y  impair  the  borrowing  capadty  of  the  city.  They 
diould  not  be  allowed  to  stand  indefinitely.  Authorization  of 
tax  notes  which  are  not  in  fact  needed  merely  result  in  piling  up 
large  unexpended  balances  which  are  not,  and  perhaps  never  will 
be,  required.  These  should  be  got  out  <rf  the  way.  The  only 
means  for  accomplishing  this  is  to  require  an  annual  review  ol 
the  entire  outstanding  commitments. 

In  respect  of  new  projects  it  will,  of  course,  not  always  be  pos- 
sible to  make  a  definite  authorization  in  the  Capital  Outlay 
Plrogramme.  It  is  recommended  that  the  appropriation  of  funds 
for  the  preparation  of  preliminary  plans  for  such  projects  should, 
wherever  possible,  be  provided  for  by  the  authorization  of  tax 
notes.  Where  a  project  or  a  series  of  projects  has  not  reached 
the  stage  for  a  definite  authorizatioiiy  the  Capital  Outlay  Pro- 


Finakgial  ADMonermATtoK:  RBOoiaifBNDATioNs  xxix 

gramme  should  show  a  Reservation  of  an  estunated  lump  sum. 
This  would,  of  course,  not  be  an  authorization  at  all.  Specific 
authorizations  or  appropriations  would  have  to  be  made  from  this 
Reservation  at  a  later  time. 

Eio^t  in  so  far  as  this  Programme  contams  specific  rescind- 
ments,  reductions,  continuances,  or  specific  new  authorizations, 
It  would  not  be  of  binding  force.  It  would  be  merely  a  plan  a 
prospectus.   Its  usefulness  would  depend  largdy  upon  the 
which  the  Director  of  the  Budget,  the  Mayor,  and  the  Board  of 
Estunate  put  mto  the  attempt  to  formulate,  and  annually  revise 
such  a  programme.  It  should  be  understood  also  that  the  adop- 
tion  of  the  programme  would  not  preclude  the  Board  of  Estimate 
from  authorizing  at  other  times  in  tiie  year  Capital  Outlay  expen- 
dituies  unprovided  for,  ot  insufliciently  provided  for,  in  the  Pro- 
grainma  It  would  not  do  to  tie  the  hands  of  the  Board  in  this 
fashion    It  IS  to  be  hoped,  however,  that  in  tiie  course  of  time 
such  additional  authorizations  would  become  exceptional 

.J^'^l^^^^J^  ^'^^  ^*P^*^*  ^^^y  Programme  to 
tne^oaKl  <rf  Estimate  for  consideration  either  during  the  month 

of  December  or  of  January.    Its  final  adoption  by  tiie  Board 
could,  however,  wait  untU  the  adoption  of  the  tax  budget 

It  ought  to  be  said,  no  doubt,  tiiat  the  figures  contained  in 
the  Capitid  Outhiy  Programme  here  suggested  have  no  relation 
to  the  amount  of  corporate  stock,  serial  bonds,  or  tax  notes  that 
would  m  fact  be  issued  during  the  fiscal  year  for  which  tiie  Pro- 
gramme was  made.  In  this  respect  tiie  Programme  would  be 
^y  mihke  tiie  tax  budget.  The  authorization  of  a  capital 
«peiiditure  does  not  necessarily  mean  that  the  whole  or  any  part 
of  ttie  expenditure  authorized  will  actuaUy  be  paid  for  at 
specific  time.  When  a  ^^contract  Uability"  wiU  faU  due  and  necS- 

^  ^'  -'^-^         -  often 

AoQinBcnoNs  of  Land 

^  attention  to  the  subject  of 

acquisition  of  land  by  the  dty.  The  present  practice  by  !Sch 
the  fflty  often  takes  title  to  land  without  having  the  ^lighto^ 


zxx 


Nbw  Yobk  Crnr's  Financsis  and 


idea  what  it  will  ultimately  cost  leaves  much  to  be  deeired.  The 

assessed  valuation  which  is  used  for  detenmning  the  so-called 
"land  liabihty"  of  the  city  is  a  wholly  useless  index.  There  is 
obvioudy  some  advantage  in  the  city's  taking  title  immediately 
to  property  the  acquisition  <rf  which  it  auihoriies.  In  such  cir- 
cumstances it  does  not  have  to  await  the  slow  process  of  con- 
demnation before  it  commences  the  construction  of  an  improve- 
ment. On  the  other  hand,  there  are  grievous  disadvantages  in 
this  procedure.  On  the  whole  your  Committee  is  incUned  to  be- 
Heve  that  the  city  should  be  prevented  horn  taking  titie  to  land 
imtil  a  tentative  award  in  condemnation  proceedings  has  been 
made  by  the  court  and  presented  to  the  Board  of  Estimate  by 
tlie  Corporation  Counsel.  If,  in  the  opinion  of  the  Board,  the 
award  is  excessive,  the  Board  should  have  authority  to  order  a 
discontmuance  of  the  condemnation  proceedmgs,  paying  the 
owner  only  the  amount  of  his  costs.  If,  on  the  contrary,  the 
award  is  satisfactory  the  Board  could  then  take  title.  Something 
diould  cotdnly  be  done  to  remedy  a  situation  in  which  condem- 
nation awards  are  sometimes  five  or  sa  times  the  amount  of 
assessed  valuations. 

The  Comptroller  has  the  power  to  purchase  property  by  pri- 
vate negotiation.  No  doubt  this  power  is  not  exercised  as  often 
as  it  might  and  should  be.  As  long,  however,  as  the  owners 
of  property  realize  the  advantage  that  accrues  to  than  by  f ordng 
the  city  to  proceed  by  condemnation  they  will  probably  usually 

refuse  to  sell.  ^ 

As  soon  as  condemnation  proceedings  have  been  mstituted 
against  a  piece  of  property  authorised  to  be  acqmred,  the  Cor- 
poration Counsel  should  be  required  to  advise  the  Board  of  Esti- 
mate, ^ving  the  date  of  the  Board's  authorization.  There  is 
no  question  that  in  many  mstances  proceedings  are,  for  one  rea- 
son or  another  or  for  no  reason  at  all,  unduly  delayed.  The 
Board  should  be  informed  of  the  reasons  for  such  ddays.  Your 
Committee  also  recommends  that  consideration  should  be  given 
to  the  possibihty  of  amending  the  law  so  as  to  expedite  condem- 
nation proceedings  m  the  courts.  Whether  this  is  practical  or 
not  we  are  not  at  preset  prepared  to  say. 


Financial  Administration:  Recommendations  xxxi 

Finally,  the  practice  of  including  the  entire  interest  charges 
from  the  date  of  taking  title  as  a  part  of  the  capital  outlay  to 
be  financed  out  of  corporate  stock  should  be  discontimrad  in  aU 
those  instances  in  which  a  condemnation  award  is  made  final 
after  the  date  when  the  project  for  which  the  land  was  acquired 
IS  actually  completed  and  in  use.  The  interest  from  that  date  is 
nothmg  more  nor  less  than  Debt  Service.  As  such  it  should  be 
met  by  a  tax  appropriation. 

Sai 

The  city  is  greatly  in  need  of  a  new  schedule  or  code  <rf  titles, 
grades,  and  salaries  in  the  civil  service.  In  the  prepamtion  and 
adoption  of  such  a  schedule,  however,  it  should  be  clearly  under- 
stood-and  the  understanding  should  be  given  wide  publicity 
among  municipal  employees-that  it  is  not  proposed  to  reduce 
the  present  salary  of  any  official  or  employee.  Hiat  is  indis- 
pen^ble.  The  spirit  of  the  service  should  not  be  disturbed  by 
toe  fear  of  stuary  reductions. 

As  soon  as  may  be  practicable,  the  Depariments  should  be 
required  to  submit  to  the  Civil  Service  Commission  a  descrip. 
tion  of  the  duties  of  aU  existing  positions.  When  the  Commb- 
sion  has  completed  a  survey  of  these  data  it  should  prepare  the 
schedule  or  code  of  titles  and  grades.  The  Commission  should 
have  complete  authority  to  fix  the  titles  of  aU  positions  within  ite 
jurisdiction,  mcluding  the  titles  of  civil  service  appointees  under 
tihe  Board  of  Education.  K  any  Department  wishes  a  new  title 
or  grade  to  be  established,  the  Department  should  submit  to  the 
t;KMmnisBion  a  detailed  description  of  the  duties  of  the  new  poei- 

92lirI,%F''"^v\f°'^^  tiiereupon  determine  whether  an 
existmg  title  is  apphcable  or  a  new  titie  should  be  estabUshed 
and  mcorporated  in  tiie  schedule.  This  schedule  should  be  kept 
"Pjo  date  and  should  be  republished  annually. 
The  Director  of  the  Budget  should  be  required  to  make  lec 

T^  t    if  «^  position  provided  for  in  the 

daZ?"-*  ^^^^  ^""'d         these  recommen- 

dations. If  need  be,  and  submit  its  own  recommendations  to  the 


jprm  Nmw  York  City's  Financss  and 

Board  erf  AHcrmm.  The  Board  <rf  AMmnen  should  thore^^ 

fix  the  rates  of  pay. 

The  State  Civil  Service  Commission  should  be  asked  to  co- 
0pm,tB  with  the  Municipal  Commission  in  the  preparation  of  a 
rimilar  adiedule  of  tittoe  and  grades  appHcable  to  the  county 
positions,  which  are  under  the  jurisdietkm  of  the  State  C(»iimis- 
sion.  It  is  important  that  aU  salaries  paid  from  city  funds  should 
be  estabhshed  as  near  as  possible  upon  the  principle  of  equal  pay 

for  equal  work. 

Your  Committee  is  pmuaded  that  in  the  frequent  salary  m- 
creases  during  the  last  decade  there  has  been  a  tendoicy  to  over- 
look important  employees  who  occupy  supervisory  or  technical 
positions.  These  are  extremely  valuable  employees  and  an 
effort  should  be  made  to  give  ilMm  sajapes  commensurate  with 
their  training,  experience,  and  responsitnlitieB. 

PUBCHASING 

The  Department  of  Purchasing  should  be  given  the  power  to 
make  purchases  under  favorable  market  conditions  in  antici- 
pation of  subsequent  needs  of  the  several  dq^artments.  For  this 
purpose  a  revolving  fund  should  be  created  by  tax  appropria- 
tion. When  suppUes  which  have  been  purchased  out  of  this 
fund  are  issued  to  any  department,  the  fund  would  be  reimbursed 
out  of  that  department's  appropriation  for  such  siqiplies.  It 
might,  indeed,  be  desirable  to  make  all  appropriations  for  sup- 
phes  and  standard  equipment  subject  to  disbursement  by  the 
Department  of  Purchasing,  rather  than  the  consummg  units. 

The  purchase  of  supplies  and  equipment  for  the  offices  of  the 
Borough  Presidents  and  for  the  county  governments  should 
unquestionably  be  given  to  the  Department  of  Purchasmg.  We 
recommend  also  a  more  generous  appropriation  for  the  expan- 
fflon  of  the  testing  and  mspectional  work  of  the  Department  and 
for  the  periodic  revision  of  standard  specifications.  The  Depart- 
ment should  have  larger  power  than  at  present  to  aco^t  or  re- 
ject deUveries. 


Financial  AniiiNismATiON:  Rxcommendations  xxxiii 


Pbofbbtt  Agcoitntabiutt 

The  manner  in  which  the  enormous  quantity  (rf  movabte 
property  bdonglng  to  the  city  is  now  cared  for  leaves  much  to 
be  desired.  There  should  be  established  in  each  department  a 
property  accountability  officer.  He  should  have  general  control 
over,  and  be  responsible  for,  all  equipment  and  supplies  in  the 
various  bureaus  and  divisions.  In  each  df  tiiese  there  should  be  an 
officer  charged  with  responsibility  for  the  care  and  upkeep  of  office 
equipment  and  for  the  dispensing  of  supplies.  These  subordmate 
officers  would  be  responsible  to  the  accountability  officer  erf  the 
department.  It  is  not  beUeved  that  this  plan  would  add  materi- 
aUy  to  the  hmdm  of  any  clerk.  It  would,  on  the  other  hand, 
impose  a  definite  responsibility  upon  particular  officers  and  em- 
ployees for  the  loss,  theft,  misuse,  or  neglect  of  city  property. 

There  should  also  be  established  a  syBtem  for  the  condenma- 
tion  of  property  dedared  to  be  unfit  for  the  use  of  any  particular 
department  or  office.  Such  condemnation  should  be  made  only 
with  the  approval  of  the  property  accountabiUty  officer  of  the 
department  and  a  representative  of  the  Director  of  the  Budget. 
Property  that  is  unfit  for  one  service  may  often  be  profitably 
transferred  for  use  by  another  department  or  service.   Such  a 
system  would  be  of  great  assistance  to  the  Director  of  the  Budget 
m  passmg  upon  requests  for  equipment.   Such  equipmmt  might 
be  furnished  by  a  transfer  of  property  from  some  other  depart- 
ment, rather  than  by  a  budgetary  appropriation.  Especially, 
however,  would  such  a  system  ehminate  the  possibility  of  a  de- 
partment's securing  an  appropriation  for  the  replacement  of 
property  declared  to  be  unfit  when  such  property,  thou^  sup- 
posedly usdess,  is  retained  by  the  department  and  passed  on  to 
be  used  by  some  subordinate.  This  appUes  particularly  to  auto- 
mobiles. 


B.  THE  REVENUE  PROBLEM 


Pbobable  Future  Financial  Needs 

To  estimate  the  financial  needs  of  the  dty  in  the  years  imme- 
diatdy  ahead  is  an  extraordinarily  difficult  task.  Without  such 
an  estimate,  however,  inteUigent  consideration  of  the  revenue 
problm  is  impossible.  There  is  at  present  no  Capital  Outlay 
Programme  even  for  a  smgle  year  ahead,  to  say  nothing  of  any 
comprehensive,  long-time  financial  plan  over  a  series  of  years. 
It  is  true  that  certain  departments  prepare  construction  pro- 
grammes that  carry  well  into  the  future,  but  these  are  exceptionaL 
Most  of  the  data,  therefore,  which  your  Committee  here  pr^ 
sents  as  indicative  of  the  probable  future  financial  needs  of  the 
dty,  are  un^ffi^^ft^l-  No  official  estimates  exist. 

E^maie  Baaed  an  Recent  Budget  Growth. — One  approach  to 
the  problem  of  formulating  an  estimate  is  through  a  study  of  the 
growth  of  expenditures  in  the  recent  past.  Diagram  I  consists 
of  a  curve  depicting  the  course  of  the  city  budgets  since  consoli- 
dation.^ The  budget  has  doubled  since  1919,  it  has  tripled  since 
1910.  The  average  annual  increase  during  the  last  five  years 
has  been  31.9  millions;  during  the  last  ten  years,  27.4  millions. 
On  the  basis  of  such  figures  one  would  conclude  that  during  the 
next  five  years  the  average  annual  increase  may  logically  be  ex- 
pected to  be  approximately  SO  miUions. 

Such  an  estimate,  however,  rests  upon  the  assumption  that 
future  budgets  will  increase  at  about  the  same  rate  as  past  budg- 
ets. This  is  not  an  unreasonable  assumption  unless  it  can  be  fore- 
seen that  the  budget  will  be  called  upon  to  carry  in  the  imme- 
diate future  expenditures  that  will  probably  bulk  much  larger  or 
much  smaller  than  correspondmg  ©cpenditures  in  the  past.  At  once 
the  question  of  subway  finance  arises.  To  what  extent  will  the 

tTiM  fignns  wffl  be  {band  in  Append^  The 
figoie  for  tluit  year  m  $512,108,831. 


Financial  ABiiDnsTBATioif:  RscomfENDATiONB  xxxv 


budget  have  to  meet  subway  costs?  There  are  in  immediate 
prospect  elaborate  proposals  for  water  supply,  sewage  disposal, 
schools,  docks,  hospitals,  bridges,  and  certain  other  public  mi- 
provements.  These  must  be  taken  into  account.  How  are  they 
to  be  financed?   What  will  be  thdr  efifect  upon  the  budget? 


DlAQBAM  I 

Tbm  Qmmm  om  Nmw  YumK  Cm*B  Budget  Singb  Consolidation 

Source:  Appendix  B 


500 


400 


100 


WwrlforiLCi^t  Budget 


tii 


0  1N0 


1920 


192S 


Obviously  only  a  very  approximate  forecast  can  be  made  for 
!  ™volve  guesses  concerning  decisions  wliicli  have 

yet  to  be  made  upon  broad  questions  of  policy. 
From  the  best  available  sources  your  CcMmnittee  has  seemed 

tigures  bearing  upon  the  probable  future  requirements  of  the  dtv 

for  pubhc  improvements  in  the  next  few  years.   These  figur^ 

™  "^^^^^  ^''^  proposed  capital  outlays  are 
included.  It  has  been  assumed  that  such  types  of  capital  outlay 
as  are  now  customarily  included  in  the  tax  budget  wiU  continue 

'See also  Appendix  H. 


CVl 


Nsw  YoBx  City's  Finan€»8  and 


to  be  so  included.  Moreover,  no  account  is  taken  of  such  items 

as  the  capital  outlay  for  extending  water  mains  into  new  terri- 
tory.* Presumably  such  investments  will  immediately  become 
revenue  produdng  and  self-sustaining. 


TABLE  I 

EEmifATBS  or  Conbtbuction  Pbojbcts  to  Be  Financbd  Othxbwiedb  Than  By 

CUBBBNT  BuiKiET  APFBOPBIATIONS  1928^-1932* 
(In  MilUoDB  of  DoQan) 


.  Projects  to  be  financed  by  the 
iinnnrn    of  securities  with 
terms  of  two  years  or  more^ 
BttDidTniwit:* 

Existing  subwajrs  wad  inde- 
pendent system 
(Includes    new  municipal 
subways  and  extensions 
imder  Contracts  3  and  4) 
Schods — Sites  and  construction 
of— 

Docks — ^Acquisition  of  land  and 
construction  of 
Jamaica  Bay  Improvement 
Gravesend  Bay  Improvement 

Incinerators 

PtriS^  improvements  (to  be  fi- 
nanced by  assessment  bonds 
and  long-term  bonds) 
Riverside  Drive  Improvement 
West  Side  Express  Highway 
Large  park  acquisitions 
Queens  Boulevard,  Construc- 
tkm  of 

Nassau  Boulevard,  Construo- 

tion  of 

Rockaway  BoaidwaQc,  Con- 
struction of 

Northern  Bouknraid,  Con- 
Btruetion  of 

Reeonstraetion  of  sewa 
tem,  lower  New  Yoiic 

Allen  Street  widening 
Grade     crossing  elimination 

11th  Ave.  track  removal 

Atlantic  Ave.  grade  crossing 

Sprinffield-St.Albans  elimi- 
nations 

Rockaway  Park-Arreme  diun- 

inations 
Corona  crossing  eliminations 
Richmond  Borough  elimina- 
tions 
Housing  projects 
Hunter  Coll^.  Conatrnetion  of 
American  Museum  frf  Natural 

History— New  Wing 
Now  CStar  Court 

Total — Estimated  corporate 
stock  and  long-term  bond 
requests   


1928 


100 

35 
8.5 


4.5 
6.34 


10. 


? 

S. 

0 

8. 


171.34  + 


1929 


100 


22.5 
7. 


4.5 
4.4 


10. 


? 

2. 

0 
0 


152.4-1- 


1930 


100 

22.5 
4.875 


3.75 
3. 


10. 


2. 


? 

1. 

8. 
O 


148.835+ 


1931 


100 

22.5 
4. 


1.5 
3.5 


10. 


? 
0 

0 
0 


148. 5+ 


1932 


100 

22.5 
4. 

.75 
2. 


10. 


? 
0 

0 
0 


Total 


500 

185 
28.075 


15. 
19.24 


60. 


10. 


T 

5. 

3. 
8. 


141.35+I75T.815+ 


After 
1932 


t 
T 


? 
7 


7 
0 

0 
0 


^The  amounts  of  this  item  are  estimated  as  follows:  1928,  6  millions;  1929,  5 
nillioiis;  1930,  1931,  and  1932,  4  millions  annually. 


Financial  Adionibkration:  REcoiiMBNnATioNs  xxxvii 


TABLE  I-<!anHnued 


1928 

1028 

1930 

1931 

19.^2 

1 

xoLai 

After 

BtBlidge   and   tunnel  project 

3, 

method  of  financing  to  b 

determined  by  th*  Ltgisls 

Ir 

ture** 

Tri-Borough  Bridge 

2. 

8. 

8. 

7. 

5. 

30. 

38th  Street  Vehicular  Tunnel 

o 
«. 

1  n 
ID. 

15. 

10. 

5. 

42. 

18. 

Henry  Hudson  Memorial  Bridg 

e  0 

1, 

3. 

A 
^  . 

A 

12. 

Brooklyn  and  Richmond  Tunnc 

(or  bridge) 

? 

? 

? 

I 

9 

t 

• 

7 

Queensborough    Btidfe  (fiey 

roadway) 

2.5 

.5 

0 

0 

V 

n 

Manhattan  Biidce  (mw  road 

u 

8. 

way) 

o 

U 

0 

0 

0 

Hbw  Bridge-Harlem  "Biver  (Eas 

t 

.8 

of  Ship  Canal) 

0 

1.5 

.5 

0 

0 

2. 

Eighth  Street  Bridge  over  Easi 

t 

River 

0 

1. 

10. 

10. 

10. 

177th  Street  Bridge  over  Harlen 

31. 

River 

0 

1.5 

1.5 

0 

0 

Washington  Bridge  Extension 

0 

0 

1. 

0 

0 

3. 
1. 

Ferry  Point  Bridm  over  Sound 

0 

0 

0 

2. 

10. 

28. 

86th  Street  AMga  ofm  East 

12. 

River 

0 

0 

0 

2. 

10. 

U. 

New   East   Rivsr  Bridge  to 

Brooklyn 

0 

0 

0 

2. 

10. 

48. 

Boefcaway  Bridge  over  Jamaica 

18. 

Bay 

0 

0 

1. 

1. 

1. 

Harway  Ave.,  StiUwell  Ave.,  and 

3. 

small  bridges— Beplaoe- 

ments 

0 

3. 

3. 

3. 

3. 

12. 

Total — Bridges  and  tunnels 

7.3+ 

26.5-i- 

43. -i- 

41.+ 

58.+  ] 

L75.8+ 

107+ 

C.  Hudson,  Harlem  and  East  Riv- 

ers— pollution — sewage  dis- 

posal   plants.  Financial 

plan  undetermined* 

1. 

5. 

5. 

5. 

5. 

21. 

D.New  Water  Supply/ 

50? 

2. 

6 

15 

35 

50 

2 

106 

!40  to 

260 

Total  (A+B-f-C-HD) 

181. 64 -H  ] 

L89.9-t- 

211.825+2 

224.5+ 

i54.25+] 

1082.115+ 

387 

Notes  to  Tabub — 

^ori-'^^:S^iJ^^'^l^;Sm^^^t]^'^J%*^^  ^'f""  yfstimated  corporate  stock  (imd 

medium  of  lonttenn  bondaT  nqamo  to  penntt  them  to  be  Snanoed  through  the 

a«4™nti!™  "  "«~^  •»  *•  iwobability  that  it  will  be  financed  by  ap«d.l 

The  figures  in  this  table  represmt  anticipated  requests  for  the 
issuance  of  securities.  They  do  not,  of  course,  represent  proposed 
paymeots  out  of  tax  funds.  On  the  basis  of  these  figures,  however 
It  18  possible  to  estimate  the  budgetary  charges  for  Debt  S«rvifle 
tnat  wiU  result  from  the  issuance  <rf  seraritias. 


xixviii  Nsw  Yobk  Citt's  FiNAKcai  Am 

Needless  to  say,  these  figures  do  not  oonstitute  an  attempt  cm 

the  part  of  your  Committee  to  formulate  a  definite  Capital  Outlay 
I^ogramme  for  the  city.  That  would  have  involved  an  analysis 
and  appraisal  of  the  various  projects  now  tentatively  put  forward 
and  a  consideration  ci  their  relative  importance.  Your  Com- 
mittee feels  ndther  competent  nor  called  upon  to  render  judg- 
ments of  this  kind.  No  doubt  some  of  the  projects  Usted  in  the 
table  will  not  be  carried  out.  Undoubtedly  other  projects  not 
thm  mentioned  will  be  found  to  be  imperatively  needed.  On  the 
whole,  however,  your  Committee  bdieves  that  during  the  next  five 
years  there  will  be  great  pressure  upon  the  city  to  finance  a 
programme  of  approximately  the  proportions  indicated. 

The  dassificatiim  of  the  items  in  Table  1  is  made  on  the  basis 
erf  the  probable  method  of  financing.  Group  A  includes  those 
projects  which,  under  present  legislative  authority,  may  be  fi- 
nanced by  long-term  bonds  and  amortized  by  annual  budget 
appropriations.  As  the  law  now  stands  the  projects  in  Group  B 
miMit  be  financed  under  the  pay-as-you-go  policy — that  is,  by  tax 
appropriaticms.  Presumably,  however,  authimty  will  be  sought 
from  the  legislature  to  finance  these  enterprises  by  the  issuance  of 
long-term  bonds.  The  sewage  disposal  item  is  classed  separately 
under  C  because  of  the  tentative  proposal  to  finance  this  project 
by  special  assessments.  Class  the  project  for  a  new  water 
supply,  will,  it  may  be  hoped,  be  self-supporting  after  cmnpletion. 
It  will,  however,  constitute  a  charge  upon  the  annual  tax  budget 
for  Debt  Service  during  a  long  period  of  construction.^ 

In  considering  the  effect  upon  the  budget  of  the  figures  set  forth 
in  Table  I  attention  will  first  be  directed  to  the  items  for  projects 

1  Tliis  ftt  kast  htm  been  tiie  former  i»Betioe  in  the  ease  of  eonstnietKm  for  water 
sillily.  An  aHernAtive  seheme  of  tapping  the  tributaries  of  the  Delaware  River 
caDs  for  slightly  greater  authorization  than  those  indicated  in  the  Table  during  the 
first  five  yeaiB  and  for  a  substantiaUy  smaller  aggiecate  cost.  The  figures  are  as 
foUows: 

1928   3  milhoni 

1929   10  millioiis 

1930   20  milliona 

1931   40  millions 

1932   45  millions 

TotaL   118  mMoiw 

Aflar  im   US 

TotaL  37S 


FnfAKciAL  Administration:  Recommendations  xxxix 

other  than  subway  construction.  Thereafter  the  overwhehningly 
knportant  question  of  subway  finance  will  be  discussed. 

Public  Improvements  Excluding  Subways— Budget  EffecL—TbB 
itons  of  Table  I  for  projects  oth^r  than  subway  construction  are 
aggregated  in  Table  11.  This  shows  that  if  the  programme  of 
pubhc  unprovements  represented  by  these  items  is  completely 
carried  out,  and  if  it  is  financed  entirely  by  fifty-year  bonds  (which 
would  reduce  the  annual  budget  chaige  to  a  minimum),  it  would 
require  an  avmge  increase  in  the  city's  debt  of  112.4  miUion 
dollars  each  year.*  The  annual  increase  in  the  budget  allowance 
for  mterest  and  amortization  would  be  5.6  million  dollars.  These 
annual  increases  are  of  course  cumulative.  In  the  budget  of  the 
fifth  year  the  increase  for  intmst  and  amortization  would  require 
a  d*t  s^ce  appropriation  of  approxhnately  28  millions  charge- 
sble  to  these  enterprises. 

TABLE  n 

BwnuaBsop  AoGBEQATE  Costs  and  Annual  Increases  in  Charges  on  Budget 
VMTUS  Iter amyicB  of  Projects  (Other  Than  Subways)  to  Bb  Einancbd 


(In  Millions  of  DoUan) 


Estimates  of 

APPROZniAn  iMmUBBT 

CJOST 

AND  AimrmAnrar 

1928 

81.6 

4.1 

1929 

89.9 

4.5 

1930 

111.8 

5.6 

1031. 

124.5 

6.2 

1982. 

154.3 

7.7 

562.1 

28.1 

Average  

112.4 

5.6 

As  we  have  already  pointed  out,  if  budget  increases  over  a  pe- 
nod  of  recent  years  be  takm  as  a  crit«ion  it  may  reasonably  be 
«pected  that  future  budgets  wiU  mount  annually  by  approxi- 
mately 26  to  30  miUions.  The  figures  just  given  indicate  that 
an  increase  of  from  5  to  6  miUions  annually  wiU  probably  be  re- 
quured  for  Debt  Service  for  pubhc  improveoMnts  otiier  than  sub- 

nnJl^  S?  ■"rase.^Posal  project  should  be  financed  by  ^eaal  amm  It  ths 

W»tM  fifUMi  would  be  reduced  perhaps  5  per  cent  " 


Nxw  YoBX  City's  Finangbs  and 


ways.  Witii  the  continued  growth  of  the  dty  the  <mli]ia^ 

expenses  for  practically  every  department  will  nec5eBBarily  expand. 
Upon  the  most  conservative  of  estimates,  based  upon  the  assmnp- 
tion  of  rigid  economy,  your  Committee  is  of  the  opinion  that  the 
annual  increase  in  the  budget  for  puriXMses  other  than  subway  con- 
struction cannot  possibly  be  lees  than  15  millions.  Indeed  the 
probable  annual  increase  seems  more  likely  to  be  25  millions. 

Subway  Finance — Budget  Effect — ^At  the  present  time  the  budg- 
et carries  very  substantial  items  referable  to  subway  construc- 
tion. In  the  1928  budget  the  Debt  Service  for  interest  on  account 
of  old  subway  construction  is  11.35  millions.  To  this  must  be 
added  2.8  millions  for  subway  sinking  fund  instalments.^  There 
is  abo  an  item  of  5.75  milUons  for  interest  on  corporate  stock  and 
corporate  stock  notes  issued  during  the  present  period  of  new  con- 
struction,* and  a  further  item  of  13  millions  for  amortiBation  at 
corporate  stock  maturing  in  1929,  1930  and  1931. 

Almost  all  of  the  cost  of  the  preparation  of  plans  and  supervi- 
mm  (tf  tlie  old  subways,  as  well  as  all  the  interest  during  the  period 
of  construction,  was  capitalized  and  converted  into  long-teim 
bonds.  As  heretofore  mentioned  a  different  policy  is  now  pursued. 
The  1928  budget  carries  an  item  of  6  millions  for  the  expenses  of 
the  enpneering  and  administrative  staff  of  the  Board  of  Trans- 
pOTtaticm.* 

It  thus  appears  that  the  1928  budget  contams  a  burden  of  ap- 
proximately 14  millions  attributable  to  the  old  subways  and  nearly 
25  millions  chargeable  to  the  new  system — a,  total  of  39  millions. 
On  the  1928  assessment  base  this  represents  approximately  21 
points  in  the  tax  rate. 

At  the  time  of  writing  it  seems  probable  that  the  plan  for  fi- 
nancing subways  which  was  presented  by  the  Board  of  Trans- 
portation and  approved  by  the  Board  of  Estimate  in  1927  will  be 
carried  out  in  some  modified  form.*  This  plan  proposes  to  draw 

i  It  k  ino^MMBble  to  divide  tbis  upropriation  faelirean  old  aad  Mur  Miliiniijr 

Becurities. 

*  In  the  1927  budget  this  item  was  3.785  millions. 

*  In  the  1927  budget  the  item  was  5  miUions. 

*  Communication  from  the  Board  of  Transportation  to  the  Board  of  EsHmate  and 
Apportionmeni  qf  the  City  qf  New  Yorkf  July  12,  1987. 


Financial  Administkation:  JEtEcoiofBNnATiONa  xli 

from  the  tax  budgets  of  the  next  few  years  sufficient  sums  to 
liquidate  more  than  half  of  the  capital  cost  of  the  new  subway 
system.  In  form  the  budget  appropriations  are  for  interest  and 
amortization  of  short-term  bonds  issued  to  supply  funds  for  capital 
outlay.  In  what  follows  your  Committee  has  used  as  a  basis  for 
analysis  the  estimates  made  in  this  Report  of  the  Board  Trans- 
portation. 

These  estimates  are  of  great  interest.  They  project  into  the 
future  the  course  of  assessed  valuations  which  determine  the  d^t 
limit  and  the  additional  revenues  to  be  expected  from  tiie  general 
property  tax.  The  Report  is  focused  on  the  problem  of  subway 
financing,  but  it  provides  the  only  official  and  the  most  compre- 
hensive outline  of  the  fiscal  problem  which  confronts  the  City, 
The  assumptions  of  the  Report  raise  important  questions  as  to 
whether  it  is  proposed  to  take  for  transit  purposes  so  large  a 
portion  of  increased  revenues  that  expenditures  for  other  neces- 
sary purposes  will  be  unduly  curtailed,  and  as  to  whether  the 
city  should  modify  its  poUcy  of  issuing  the  bulk  of  its  obligations 
for  terms  of  fifty  years. 

The  original  proposals  of  the  Board  of  Transportaticm  may  be 
briefly  set  forth  as  follows: 

(1)  that  the  tax  rate  be  stabilized  at  2.66  (the  1927  rate) ; 

(2)  that  approximately  half  of  the  increased  revenue  which 
is  expected  from  the  appHcation  of  this  rate  to  the  growing  tax 
base  be  made  available  for  new  subways; 

(3)  that  62  per  cent,  of  the  construction  expenses  for  subways 
be  met  in  the  first  instance  by  the  proceeds  of  the  issue  of  short- 
term  paper  or  callable  bonds  to  the  amount  of  418  miUions,^ 
and  that  the  proposed  budgetary  contributions  be  used  to  carry 
this  paper  and  to  amortiie  it. 

The  figures  of  the  Board  of  Transportation  which  are  pertinmt 
to  our  diseusnon  here  are  "moderately  estimated  for  five  years  as 
follows:'** 

.    ^J^^^*  four- and  five-year  bonds  in  the  amount  of  310  millions  and 
1*5/5!®""^  on  «U  after  five  years  in  the  amount  of  108  miUiong. 
Cf.  Cmmmie&lfmfivm  ihB  Board    Transportation,  July  12,  1927,  p.  24. 


irlii 


Nbw  Yobk  City's  Financbs  and 


March 

l8t 

BSBthnated 

Annual 
Increase  in  Taz- 

Increase  ia 
CSty  ReveniM 
at  2.66 
Tu  Bate 

Available  for 
Increase  in 
Budget  far 
G^aeral 

•1927 
•1928 
1929 

1930 
1931 
1932 

$1,581,000,000 
800.000,000 
800,000,000 

800,000,000 
800,000,000 
1,800,000,000 

921,280,000 
21,280,000 

21,280,000 
21,280,000 
47,880,000 

$11,280,000 
10,280,000 
10,280,000 

10,280,000 
24,880,000 

Available  for 
New  Rapid 

TnuMit  ProiMis 

$10,000,000 
10,000,000 
11,000,000 

11,000,000 

11,000,000 

23,000,000 


Available  every  year  after  five  years  without  increasing  the  tax  rate  $76,000,000 


*Note:  There  will  be  available  for  the  budgel  to  be  Adopted  in  October,  1927,  the 

sum  of  $10,000,000  included  in  the  budget  of  1926  to  provide  for  arrearages,  and  an 
additional  $10,000,000  to  be  gained  from  increase  of  taxable  valuations  to  be  adopted 
in  October  and  confirmed  next  February,  or  a  total  of  $20,000,000  available  in  the 
next  budget  for  interest  and  authorization  of  new  short-term  bonds.  The  amount 
ot  inereaaed  Tiluatioiis  wffl  be  appioiziinat^  known  in  October  when  the  budget  is 
adiqyted. 

In  accordance  with  this  plan,  an  appropriation  of  20  millions 
for  Debt  Service  on  short-term  paper  was  requested  in  the  budget 
of  1928.  Before  the  budget  was  adopted,  however,  modifications 
were  made  which  resulted  in  a  reduction  of  the  request  to  13 
millicms.^  The  indusion  of  this  item  without  certification  by  the 
CcmiptroUer  was  contested  in  the  courts,  but  was  finally  sustained 
by  the  Court  of  Appeals. 

As  events  proved,  the  increase  in  the  assessment  base  for  1928 
was  far  greater  than  was  anticipated.  The  increase  in  city  revenue 
with  the  rate  of  2.66  was  estimated  to  be  sufficient  to  grant  the 
request  of  the  Board  of  Transportation  for  13  millions  and  to 
cover  increased  expenditures  for  other  city  purposes  to  the  extent 
of  24.6  millions.  This  latter  figure  was  more  than  twice  what  the 
Board  of  Transportation  estimated  (11.28  millions)  would  be 
available. 

*  Modifications  were  made  in  the  ahort-tenn  pi^Mr  wludi  waa  offffed  «t  thia  time. 

It  was  also  shown  that  a  part  of  the  request  was  rendered  superfluous  by  the  inclusion 
in  the  general  budget  appropriation  for  interest,  of  a  part  of  the  sum  asked  for.  The 
item  of  interest  on  paper  issued  on  account  of  the  independent  subway  system  ia 
$5,750,000  in  the  1928  budget  as  compared  with  $3,785,000  in  the  1927  budget. 


FiNANGiAii  ADiUNiBTaiiTxoN:  Rbcomuisndations  xHU 

Pbobable  Future  Coubse  of  Assessed  Valuationb 

The  plan  of  the  Department  of  Transportation  is  based  on  defi- 
nite estimates  regarding  the  future  course  of  assessed  valuations. 
It  IS  assumed  that  the  tax  base  will  increase  by  800  millions  each 
year  until  1932,  when  in  addition  to  this  normal  annual  increase 

TABLE  ra 


Assessed  Value  and  Full  Value  of  Taxable  Real  EatATE,  1898-1928 


1  ^ 
1  Aanmtid  Value 
1  oi  1  axaole  Jtiea 
Estate 
in  Millionsi 

Azmua  1  Increase 
1      in  Assessed 
Values  of  Taxa 
Die  Real  Estate 
in  MUHffM 

1 

®  Assessed  Value 
of  Taxabfe 

in  Ifiniom 

I 

Assessed  Valu 
OI  Wew  Build- 
ings Exempt 
until  1932 

IB  JMU1IKND8 

1 

e 

Full  VnliiA 

1        X  till     V  cliU6 

of  Taxable 
Real  Estate 
in  MiBioiw 

1898 

2,533.7 

OoOil 

1899 

2,932.4 

398.7 

4312 

1900 

3,168.5 

236.1 

4660 

1901 

1      3  297  fi 

09.3 

4762 

1902 

3,330.6 

92.8 

4899 

1903 

4,751.5 

1,420.9 

53S4 

1904 

5,015.5 

264.0 

5635 

1905 

5,221.6 

206.1 

3,740.1 

5867 

1906 

5,738.5 

516.9 

4,082.6 

6446 

1907 

6,240.5 

502.0 

4,325.1 

7011 

1908 

6,722.4 

481.9 

4,666.3 

7553 

1909 

6,807.2 

84.8 

3,915.6 

7648 

1910 

7,044.2 

237.0 

4,033.7 

7915 

1911 

7,858.8 

814.6 

4,642.2 

8636 

1912 

7,861.9 

3.1 

4,650.9 

8640 

1913 

8,006.6 

144.7 

4,683.5 

8799 

1914 

8,049.9 

43.3 

4,699.9 

8750 

1915 

8,109.8 

59.9 

4,745.0 

8721 

1916 

8,207.8 

98.0 

4,717.2 

8826 

1917 

8,254.5 

46.7 

4,670.2 

8876 

1918 

8,339.6 

85.1 

4,660.0 

8872 

1919 

8,428.3 

88.7 

4,665.3 

8966 

1920 

8,626.2 

197.9 

4,722.8 

9177 

1921 

9,973.0 

1,346.8 

5,044.0 

10610 

1922 

10,250.0 

277.0 

3,099.9 

11142 

1923 

10,596.1 

346.1 

5,210.2 

248. 

11909 

1924 

11,148.8 

552.7 

5,443.0 

482. 

12119 

1925 

11,901.3 

752.5 

5,695.8 

804. 

12938 

1926 

12,997.6 

1,096.3 

6,213.3 

896. 

14128 

1927 

14,539.8 

1,542.2 

7,139.5 

917. 

15804 

1828 

15,846.6 

1,305.7 

7,748.32 

916. 

17038 

*  ^eludes  Real  Estate  of  oorpoiations  and  special  £taiiolii8ea. 
Plreliminary  figure. 


Nxw  YoBK  City's  Financbs  and 


"the  ecq>iratioii  of  the  exemptions  granted  under  the  emergency 
housing  laws  will  add  more  than  one  billion  ddlan  of  now  exm^t 

property  to  the  tax  roll  of  1932."  * 

The  figures  of  Table  III  give  the  assessed  value  and  the  full 
value  of  real  estate  in  New  York  from  1898  to  1928.  These  figures 
diow  that  in  recent  years  aBseesments  have  been  incfeasmg  at  an 
unprecedented  rate.  The  main  cause  for  this  is  almost  certainly 
due  to  extensive  new  construction  attributable  to  the  undersupply 
of  buildings  during  the  years  of  the  war.  They  show  also  that 
assessment  increases  have  been  due  more  largely  to  building  than 
to  land  values.  In  1905  land  values  made  up  approximatdy 
three-fourths  of  the  assessment  rolls.  Today  they  are  slightly 
less  than  one-half. 

The  question  arises  whether  the  abnormid  stimulus  to  building 
tibat  f dlowed  the  starved  years  of  the  war  is  about  to  dis- 
appear. 

It  is  true  that  for  the  last  eight  years^  (1921  to  1928)  the  average 
annual  increment  has  been  approximately  900  miUions.  In  the 
preceding  seven  years  (1914  to  1920)  the  average  increment  was 
only  90  millions  a  year.  In  the  more  normal  period  antedating 
tibe  war  (1907  to  1913)  assessments  showed  an  average  increase  of 
325  miUions  per  year.  Increments  of  over  800  milUons  have  been 
recorded  only  six  times  since  the  date  of  c<msolidation  (1898). 

The  extraordinarily  large  increase  in  the  assessments  of  1928 
undoubtedly  strengthens  the  proposal  of  the  Board  of  Transporta- 
tion. It  may  be,  however,  that  this  large  increase  will  be  offset 
by  extraordinarily  small  increases  in  the  next  few  succeeding  years, 
lliis  will  ahnost  certainly  result  if  there  is  a  big  slump  in  building. 
What  the  future  may  disclose  in  this  respect  is  almost  anybody's 
guess.  On  the  whole,  however,  your  Committee  is  of  the  opinion 
thaty  despite  the  increase  of  1928,  the  estimates  of  the  Board  of 
Transportation  do  not  err  in  the  direction  of  conservatism. 

*  Communication  from  Board  of  Transportation^  July  12,  1927,  p.  24. 

*This  was  a  period  of  abnormally  high  prices  for  building  materials  and  high 
costs  for  construction  work.   This  accounts  in  part  for  the  high  value  placed  upon 
the  volume  of  new  building.  Should  general  prices  decrease,  it  is  quite  possiUe  that, 
tlie  binidmsB  eieeted  ii^iils  midi  lui^ 
lower  beais. 


FiNANGUi.  Administration:  Rbcommendations  idv 

This  is  especially  true  in  the  matter  of  the  item  of  1,000  miUions 
which  the  Board  estimates  will  be  added  to  the  rolls  in  1932  as  a 
result  of  new  construction  which  down  to  that  date  is  by  law  ex- 

^  ™^  III  now  stands 

at  916  milhons,  having  declined  slightly  since  1927  It  will 
clearly  not  be  possible  to  add  the  full  present  value  of  these  ex- 
empt  buildings  to  the  rolls  in  1932  because  of  the  depreciation 
which  wiU  have  accrued  by  that  date.  A  large  part  of  the  916 
milUons  consists  of  buildmgs  of  very  flimsy  construction.  The 
value  of  such  buildings  decreases  rapidly  with  the  passing  years. 
At  the  expiration  of  the  exempt  period  the  owners  can  be  de- 
pended  upon  to  protest  vigorously  agamst  valuations  in  excess  of 
true  values.  For  these  reasons  we  estimate  that  instead  of  1  000 
milhons  the  city  may  count  itself  fortunate  if  it  succeeds  in  addinir 
as  much  as  600  mUlions  in  1932. 

Adbquacy  of  the  Property  Tax  to  Solve  the  Rbvenot 

Problem 

Itt  spite  <rf  these  possible  criticisms  of  the  estimates  of  the  Board 
of  Transportation  we  have  in  Tables  IV  and  V  accepted  such  esti- 
mates as  the  basis  of  the  calculated  yield  of  the  general  property 
tax  Jn  addition,  unofficial  estimates  were  secured  from  the  office 
of  the  Secretary  of  the  Board  of  Estimate  of  the  probable  increases 
m  the  General  Fund.^  In  these  tables  it  is  assumed  that  no  change 
will  take  place  in  the  assessments  of  peisonal  property  and  that 
the  present  assessment  poUcy  in  respect  of  the  relation  between 
market  value  and  full  value  will  also  remain  unchanged.* 

rece  JedTrom^'t hHJT*  ^  ^  ^         "^^^  «weU  the  amounts 

received  from  the  state  by  approximate  y  10  millioiifl  in  the  next  thv^  x«J«r  w 

account  IS  taken  of  thi.  in  our  estimates'^becar^ri.  .JS^ 

needed  for  the  expanding  costs  of  the  school  system.  um  u  wiu  au  be 


xlvi 


Nbw  YoiiK  City's  Finances  and 


TABLE  IV 

WamMJOEB  or  the  Yieu>  of  a  2.66  Tax  Raib  and  ths  Amounts  Necessabt  to  Bii 
Eaisbd  Fbom  Revenues  Other  Than  ths  Gbnbsal  Pbofbbtt  Tax  if  thb 
TmomiBm  Subway  Plan  is  Adopted. 


(Millions) 


(1) 

(2) 

(3) 

(4) 

(5) 

(6) 

(7\ 

(8) 

(9) 

Budget 

Budget 

Required 

Required 

to  Meet 

to  Meet 

Assessed 

Tax 

Tax 

Addi- 

Total 

General 

Resulting 

Subway 

ReBuItlnc 

Value  of 

Rate 

Levied 

tional 

Budget 

Expenses 

Surplus 

Pro- 

General 

Assumed 

on 

Income 

Possible 

of 

or 

gramme 

Deficit 

Property 

to  be 

General 

from  the 

Under 

1928 

Deficit 

and 

(5)- (8) 

(See 

Fixed 

Property 

General 

These 

Level 

(6)-(6) 

Annual 

Schedule 

at 

a)x(2) 

Fund 

Condi- 

and Sub- 

Increase 

A) 

aM% 

(Esti- 

tions 

way  Fko- 

of  15 

mated)* 

<3)-K4) 

•nunme 
(Seheduk 

Million  in 
General 

B) 

Expenses 

(Schedule 
C) 

1928 

$16,154 

2.66 

$429.7 

$82.8 

$512.5 

$512.5 

$  .0 

$512.5 

$  .0 

1929 

16,828 

2.66 

447.6 

85.8 

533.4 

527.5 

5.9' 

542.5 

9.1** 

1930 

17,501 

2.66 

465.5 

88.8 

554.3 

541.5 

12.S* 

571.5 

17.2** 

1931 

18,175 

2.66 

483.5 

91.8 

575.3 

554.5 

20.8* 

599.5 

24.2* 

1932 

19,848 

2.66 

£28.0 

94.8 

622.8 

573.5 

49.3* 

633.5 

TABLE  V 

BRntAlSS  OF  THE  YlELD  OP  A  2.75  TaX  RaTE  AfTER  1928  AND  THE  AMOUNTS  NeCBS- 

SART  TO  Be  Raised  From  Revenues  Other  Than  thb  Gsneral  Pbopebtt 
Tax  if  Pboposed  Subway  Plan  is  Adopted. 

(Millions) 


(1) 

Value  of 
General 
Property 

(See 
Sdiedule 
A) 

(2) 

Tax 
Rate 
Assumed 
to  Re- 
main 
Constant 
at 
2.7fi% 

(3) 

Tax 
Levied 

on 
General 
Property 
(l)x(2) 

(4) 

Addi- 
tional 
Income 
for  the 
General 
Fund 
(Esti- 
mated)* 

(5) 

Total 
Budget 
Possible 
Under 
These 
Condi- 
tions 
(3)-f(4) 

(6) 
Budget 
Reauired 
to  Meet 

General 
Expenses 
of 
1928 
Level 
and  Sub- 
way Pro- 
gramme 

(See 
Schedule 
B) 

(7) 

Resulting 
Surplus 

or 
Deficit 
(5)-(6) 

(8) 
Budget 
Required 
to  Meet 
Subway 

Pro- 
gramme 

and 
Annual 

of  15 

Million  in 
General 
Expenses 

(Schedule 
C) 

(9) 

Resulting 
Surplus 

or 
Deficit 
(5)-(8) 

1928 

$16,154 

2.66 

$429.7 

$82.8 

$512.5 

$512.5 

$  .0 

$512.5 

$  .0 

1929 

16,828 

2.75 

462.8 

85.8 

548.6 

527.5 

21.1* 

542.5 

6.1* 

1930 

17,501 

2.75 

481.3 

88.8 

570.1 

541.5 

28.6* 

571.5 

1.4" 

1931 

18,175 

2.75 

499.8 

91.8 

591.6 

554.5 

37.1* 

599.5 

7.9" 

1932 

19,848 

2.75 

545.8 

94.8 

640.6 

573.5 

67.1* 

633.5 

7.1* 

a.  Estimated  conservatively.  8.  Surplus  avaflafale  for  other  puiposes. 

d  Deficits  fdiidi  would  have  to  be  made  up  by  revenues  fnm  other  souroes. 


Financial  ADiamsTRATioN:  Recommendations  xlvii 


SCHEDULE  A 

Td  MaxBOD0  or  Bbtdiating  the  Value  of  Taxable  Pbopbbty  in  New  Yorx  Cnr 

1928-1932 

(BitiiiirtesofliM^ 

TnamporttLUon.) 


(Millions) 


Assessed 
Value  of 

Real 
Estate  in 
N.  Y.  C. 
in  1927 « 

(2)            (3)            (4)          •  (5)  (8) 
V^'^T  J^^<"■eases  m  Assessment  of  Real  Estate  over 
1927  Level  on  Basis  of  FiguKs  Conmiled  by  Boitd 
of  Tnuosport«tioa< 

(7) 

Assessed 

Value  of 
Personal 
Property* 

CB) 

Total 
Assessed 
Value  of 
Taxable 
Property 

1928 

1029 

i«ao 

mi 

1883 

1928 

$14,540 

$1306 

$308 

$16,154 

1929 

14,540 

1306 

$673.5 

308 

16,828 

1930 

14,540 

1306 

673.5 

$673.5 

308 

17,501 

1931 

14,540 

1306 

673.5 

673.5 

1673.5 

308 

18,175 

1932 

14^ 

1306 

673.5 

673.5 

673.5 

$1,673.5* 

306 

19,848 

a.  bdndiog  q)e(aal  franehisn. 

b.  Including  I  billion  tar  new  baiMiiigs  exempt  untU  1932 

.-1.^°        the  Board  of  Transportation  estimated  that  the  ineieM  in  real  CBtat. 

w'^'Ih  ".^  T.r'^r.^  "  1932  when  the  n^Z^^^ 

^l^^^  ^A      To^"*"^  the  incremeSTf^^ 

STl^i^lf'Vli^-i'^  ass^ent  figure  was  1306  millions  greater  than  in 
the  1927  asseasmmt  tbs  ASenoM  between  the  estimated  800  miffions  and  1306 

T^"J£Sli°"**T^  four  ^  to  «d«oe  the  -noXof  tl^  i^'^t 


ilviii  New  Yobk  Citt's  FmANcn  and 

SCHEEILJLE  B 

SBnMATED  BxnxsKTS  Rbquibxd  to  Mkst  1028  Lbyxl  ofGsnuul  Eobmbm  Plus 

SOBWAT  FlKMOUMHK  OF  THX  BoABD  OF  TSANSF<nXA!I10N. 


(Millions) 


a> 

1928 
Budget 
Level 
Exduaiye 
of  New 
Subway 
Items' 

(2)            (3)            (4)            (5)  (•) 

Annual  IncreMes  Above  1928  Levd  to  Meet  Subway  Prosnunme 
lEtaggerted  in  the  1027  ReiMrt  of  the  Boeid  of  TramqxHrtation* 

(7) 

Total  Bndf- 

et  if  Sub- 
way 
Expenses 
only  were 
Allowed 
to  Increase 
Above 
1928 
Level  as 
Indieated 

1028 

1930 

1080 

1931 

1932 

Totia 

1928 

$497.5 

15 

15 

$512.5 

1929 

497.5 

15 

15 

30 

627.5 

1930 

497.5 

15 

15 

14 

44 

541.5 

1Q31 

497.5 

15 

15 

14 

13 

57 

554.5 

1982 

^.5 

15 

15 

14 

13 

19 

76 

573.5 

a.  Arrived  at  by  subtracting  from  the  512.5  millioiie,  tlie  13  million  item  and  the 

2  million  appropriation  for  interest  on  new  subway  paper. 

6.  The  2  million  for  1928  is  the  interest  item  (see  footnote  a).  The  other  figures 
are  those  neceaaary  should  the  1927  programme  of  the  Board  of  Transportation  be 
put  into  effect* 


SCHEDULE  C 

EsTiMATBn  Budgets  to  Meet  Requirements  of  an  Annual  Increase  of  15  Mil- 
lions IN  THE  Amount  Spent  fob  Gbnesal  Pubposbs  in  Addition  to  Thoss 

NbBDBD  lOS  TBB  PK»08BD  SDBWAT  PbOCOIAIIMB  of  Tim  BOABD  CXF  TbANB- 


KMTATION. 

(Millions) 


ToiM  from 
Schedule  B 
Assumed  Bud- 
get Required 

for  New 
Subways  but 
Allowing  for 
no  Otiaer 
Increased 
E]q>enditure8 

(2)                (3)               (4)  (5) 

At^wiinl  Increases  Above  1928  Level  to  Meet  Minimum 
Estimate  of  Increases  in  Qmeral  Eipenw 

(«) 

Total 
Estimated 
Budget 

loao 

1981 

1988 

1928 

$512.5 

$512.5 

1929 

527.5 

15 

542.5 

1930 

541.5 

15 

15 

571.5 

1931 

554.5 

15 

15 

15 

599.5 

1932 

573.5 

15 

15 

15 

15 

633.5 

Financial  ADiomsmATioN:  Recommendations  xlix 

Table  IV  assumeB: 

(1)  appropriations  to  finance  subway  construction  equal  to 
the  sums  called  for  by  the  plan  of  the  Boaiti  of  Transportatioii 
(see  Schedule  B). 

(2)  a  minimum  increase  in  the  tax  budget  for  general  ex- 
penses  of  15  millions  annually  (see  Schedule  C). 

(3)  increases  in  assessed  values  in  accordance  with  the  esti- 
mates of  the  Board  of  Transportatiim  (see  Schedule  A). 

(4)  a  fixed  tax  rate  of  2.66. 

With  these  assumptions  the  figures  in  Table  IV  show  that  addi- 
tional  revenues  wiU  have  to  be  found  m  the  foUowing  amounts: 


1929  9.1  millions 

1^  17.2  millions 

 24.2  millions 

1932  .  10.7  miUions 


Total  61.2  millions 


Table  V  contains  precisely  the  same  assumptions  as  Table 
IV,  with  the  exception  that  the  tax  rate  is  figured  at  2.76  in- 
stead of  2.66.  The  figures  show  that  with  this  higher  rate  addi- 
tional revenues  will  not  have  to  be  found.  Over  the  four  years 
there  will  be  a  net  surplus  of  3.9  millions  (13.2-9.3). 

These  figures  speak  for  themselves.  If  the  programme  of  the 
Board  of  Transportation  is  to  be  carried  out  and  if  the  conserva- 
tively  estimated  increase  of  15  miUions  a  year  is  to  be  provided,  a 
tax  rate  of  2.66  will  be  inadequate  to  meet  revenue  needs.  61.2 
milhons  of  additional  revenue  must  be  found  before  1933.  Obvi- 
ously,  therefore,  either  the  tax  rate  must  be  forced  above  2.66  or 
additional  revenues  in  substantial  amounts  must  be  secured  from 
other  sources.  This  is  the  only  alternative,  unless  the  estimated 
mmunum  annual  increase  of  15  millions  for  expenses  other  than 
subways  is  scaled  further  down. 

The  highest  tax  rate  ever  imposed  in  New  York  City  was  the 
1921  rate  of  2.77.  No  doubt  there  would  be  bitter  opposition  to 
an  mcrease  m  the  tax  rate  above  the  1928  level  of  2.66.  This 
opposition  would  come  especiaUy  from  those  who  question  the 


1 


Nkw  Yobk  Cftt's  Finances  and 


wisdom  of  a  policy  of  subway  financing  which  in  eff eei  amounts 

to  defraying  a  large  part  of  the  cost  of  subway  construction  out  of 
current  revenues.  An  increase  in  the  tax  rate  sufficient  to  meet 
both  the  programme  of  the  Board  of  Transportation  and  the 
estimated  increase  of  15  millions  for  other  purposes  would,  <rf 
course,  be  possible,  even  within  the  constitutional  two  per  cent, 
tax  rate  limit.^  In  view,  however,  of  the  probable  strenuous  oppo- 
sition to  any  considerable  increase  of  the  property  tax  rate, 
it  seems  appropriate  to  turn  at  once  to  orauuderation  of  other 
possible  sources  of  revenue. 

Possible  ADDmoNAL  Soxtbces  of  Rxvenxje 

In  any  search  for  additional  sources  of  revenue  ibere  is  avail- 
able a  considerable  range  of  choice.  When  various  types  of  pub- 
lic revenues  are  classified  according  to  their  underlying  theories 
there  stand  at  one  extreme  such  general  taxes  as  the  personal  in- 
eome  tax.  These  are  levied  upon  the  principle  of  abiUty-to-pay 
without  r^ard  to  any  tqiedal  benefit  reodved  by  the  taxpayer. 
At  the  other  extrme  stand  what  are  commonly  called  prices. 
Such,  for  example,  are  water-charges.  In  theory  these  are  not 
ev^  compulsory;  they  are  estabUshed  on  the  basis  that  one  will 
not  buy  the  services  offered  unless  he  feels  that  Uie  special  benefit 
flowing  to  him  justifies  the  expenditure.  Howevor  questaonable 
may  be  the  theory  of  non-compulsion,  the  reality  of  the  special 
benefit  is  indisputable.  Between  these  two  extremes  He  all  the 
oth^  types  of  revenue,  combining  in  vaiying  proportions  the 
demits  of  pure  tax  and  price. 

General  Consideratians. — ^As  bearing  upon  this  subject  of  pos- 
sible new  sources  of  revenue,  your  Committee  invites  attention 
to  a  few  general  considerations. 

(1)  Even  where  a  function  performed  by  the  city  gives  rise  to 
traceable  special  benefits  there  is  often  a  question  as  to  how  far  it 
is  desirable  to  attempt  to  recover  the  cost  by  charges  levied  upon 
the  direct  beneficiaries.  In  some  cases  social  considerations  make 
it  clearly  desirable  for  the  city  to  furnish  the  services  at  a  price 
far  below  cost  or  for  no  price  at  all.  Individual  estimates  of  the 

^  In  estimating  the  two  per  cent,  limit  there  are  deductions  from  the  total  tax  rate. 


FiNANCTAL  ADMummueum:  Bxcomasm>ATiom  li 

importanoe  of  tiuMe  considerations  differ  in  each  case.  There  is 
consequent  y  an  opportunity  for  endless  debate  among  persons 
with  entirely  sincere  convictions. 

self  interest  on  the  part  of  those 
who  receive  speml  benefits  should  prompt  them  to  urge  that  the 
cost  of  the  functions  which  give  rise  to  the  benefits  be  met  by  the 
adoption  of  a  taxation  rather  than  a  price  policy. 
(3)  There  are  serious  technical  difficulties  in'  tracing  special 
^^^f'^'^^    There  is  probably  no  governmental 
ftinctKm  that  doeq  not  carry  with  it  some  benefits  of  a  general 
nature  as  contrasted  with  special  benefits.  Moreover,  withmany 
public  services  and  improvements  the  total  benefit,  general  and 
specific,  is  largely  in  excess  of  the  cost.  In  such  cases  how  the 
cost  should  be  apportioned  is  a  matter  for  consideration.  Again 
in  casw  where  the  unprovements  affect  land  values  the  fairness  of 
attaching  costs  directly  to  the  land  depends  largely  upon  the  past 
pohcy  of  the  community  with  respect  to  such  charges.   If  the 
people  of  a  community  have  come  to  expect  and  count  upon 
cha^  of  a  certam  type,  such  charges  tend  to  become  absorbed 
m  the  determination  of  the  seUing  value  of  the  knd.   Tlius  a 
programme  which  would  involve  no  distiesB  in  one  dty  mieht 
work  out  extremdy  unfauiy  in  another. 

(4)  The  various  repercussive  effects  of  the  lack  of  a  uniform  and 
definite  pohcy  m  financing  public  services  must  be  taken  into  ac 
count.   A  city  which  has  been  financing  a  given  function  by 
mea^  of  a  general  tax  and  which  changes  its  policy  to  that  of 
pncmg  virtuaUy  unpoees  a  penalty  upon  those  who  must  now 
a«sept  a  pnce  basis.   For  example:  where  a  city  has  through 
general  taxes  been  paying  the  expense  of  bridges  serving  a  certi^ 
section  of  the  city,  the  adoption  of  a  poOey  of  tolls  for  new  bridges 
sei^a  different  section  of  the  city  may  mvolve  injustice  to 
those  yfbo  are  called  upon  to  pay  tolls  to  use  the  new  bridges  The 
juers  of  the  new  bridges  have  paid  taxes  on  the  old  bridges,  but 
the  users  of  the  old  bridges  will  not  pay  taxes  on  the  new  bridges 
(6)  Then  IS  a  general  tendency  on  the  part  of  elected  oflScials  to 
Choose  taxes  rather  than  prices  because  it  is  nearly  always  po- 
tticaUy  expedient  to  refrain  from  formulating  proposi  for 


Hi  New  York  City's  Finances  and 

services  and  improvments  in  definite  financial  f onn.  If  the  cost 
is  brought  h<»ne  to  the  public  in  the  fonn  of  a  price,  theie  is 
apt  to  be  much  greater  opposition  to  the  improvement. 

(6)  There  is  a  vague  but  unsound  conviction  that  taxes  come 
from  some  vast  economic  surplus  from  which  can  be  tapped  al- 
most without  limit  the  money  needed  to  solve  any  public  financial 
problem.  It  is  unnecessary  to  labor  this  point,  but  it  should  be 
recognized  that,  as  a  general  proposition,  the  money  which  the 
city  collects  and  uses  for  pubUc  purposes  is  diverted  from  the 
pod^ets  of  private  individuals  who,  if  not  for  the  tax,  would  be  in 
a  position  to  utilize  it  otherwise.  The  scope  of  public  expenditures 
can  be  determined  in  a  soimd  manner  only  when  one  has  brought 
into  the  picture  the  "sacrifice  cosf  of  the  taxpayer. 

(7)  Finally,  as  pubhc  eiqpenditures  increase  and  particularly  in 
times  €t  finmdal  pressure,  the  tendeiusy  appears  to  be  to  devdop 
revenues  which  lie  toward  the  price  end  of  the  scale  rather  than 
toward  the  tax  end.  In  general  the  Committee  feels  that  this  is  a 
sound  tendency. 

Although  these  g^eral  ecmsideratians  cannot  be  precisely  ap- 
praised, they  are  neverthdess  of  obvious  importance  in  ooimeetion 
with  any  quest  for  new  sources  of  revenue. 

The  Real-Estate  Tax, — Our  first  consideration  is  whether  it  is 
possible  to  increase  the  productivity  of  the  real-estate  tax.  The 
general  property  tax,  which  is  really  almost  a  inue  real-estate  tax, 
is  now  responsible  for  about  80  per  cent,  of  the  total  tax  revenue 
of  the  city.  Within  the  constitutional  two  per  cent,  limit  it  is 
possible  to  vary  the  rate  with  the  needs  for  revenue.  During  the 
pmod  1914-1921  this  rate  on  real  estate  increased  rapidly — irom 
1.78  to  2.77.  During  the  past  few  years  it  has  declined  percepti- 
bly—to 2.66  for  1927  and  1928.  This  history  gives  little  founda- 
tion for  the  conception  of  a  fixed  and  invariable  charge  which  the 
city  may  fairly  make  upon  real-estate  values.  There  is,  howev^, 
in  the  community  a  general  conviction  that  the  real-estate  tax  is, 
to  a  very  considerable  extent  at  least,  shifted  to  rent-payers,  and 
that,  in  the  case  of  home-owners,  the  burden  of  the  tax  with 
assessments  at  their  present  level  has  become  so  great  that  it  is 
inadvisable  to  increase  it. 


Financial  Adionibtration:  RBooMifaNDATiONB  liii 

It  senns  searody  possible  that  an  increase  in  the  rate  on  real 
estate  above  2.75  would  be  attempted.  Indeed,  as  has  been  said, 
it  would  be  surprising  if  it  should  prove  possible  to  advance  the 
rate  beyond  2.66.  Furthermore,  it  must  be  remanbored  that  a 
housing  policy  of  emnptmg  new  buildings  has  already  been 
ad<^ted,  and  the  poHcy  of  virtual  exemption  from  the  land  tax  in 
case  of  certain  projects  is  now  contemplated.  It  has  not  seemed 
wise  to  the  Committee  to  recommend  an  mcrease  in  the  rate  of 
the  real-estate  tax  to  the  point  that  would  be  required  to  meet 
probable  needs. 

It  should  be  said,  however,  that,  since  the  proposed  contribu- 
tions for  subway  purposes  are  to  be  inserted  m  the  budget  in  the 
form  of  Debt  Service,  the  Committee  sees  no  lilralihood  that  the 
two  per  cent,  constitutional  limitation  upon  the  tax  rate  will  prove 
a  smous  embarrassment.  The  Committee  has  also  made  calcu- 
lations which  indicate  that  with  the  additional  authorization  <rf 
$300,000,000  provided  in  the  recoit  amendment  of  the  Constitu- 
tion, it  will  be  possible  to  operate  without  risk  of  embarrassment 
from  the  o<mstitutional  ten  per  cent,  debt  limit. 

The  Direct  State  Tax  on  Real  Estate,— There  is  a  possibiHty, 
however,  of  the  city's  receiving  a  larger  revenue  from  real  estate 
without  the  necessity  of  a  higher  total  rate.  This  would  be  pos- 
sible if  tiie  state  could  be  persuaded  to  rehnquish  the  share  which 
it  now  receives  from  the  yield  of  the  property  tax.  The  state  now 
utilizes  the  direct  state  tax  as  a  flexible  element  in  its  budget. 
For  a  number  of  years,  no  direct  state  tax  was  levied.  It  was  re^ 
introduced  at  the  tme  of  the  financial  pressure  due  to  the 
improvem«its  of  the  Erie  Canal,  and  has  been  imposed  annually 
m  varying  amounts  since  1911.   In  spite  of  variations  from  year 
to  year,  the  state  may  now  be  said  to  have  established  this  as  a 
more  or  less  regular  source  of  revenue  to  the  extent  of  approxi- 
matdy  25  millions  annually.  Of  this  amount  about  58  per  cent,  is 
received  from  New  York  City.   The  contribution  of  the  city  in 
the  form  of  direct  state  tax  on  property  was  in  1926  $17,564  000 
in  1927  $12,622,000.  In  the  state's  financial  systmi  this  tax'per' 
^ms  the  useful  function  of  providing  a  variable  and  elastic 
ctanent  which  can  be  conveniently  used  for  balancing  the  budget. 


liv  New  York  City's  Finances  and 

If  there  is  on  this  account  serious  objection  to  resigning  the  tax 
mtirdy,  it  would  still  be  possible  to  decrease  its  amount.  The 
state  could  secure  the  amount  of  this  decrease  from  other  sources. 
Under  such  a  plan  the  contribution  of  New  York  City  might  be 
reduced  by  10  millions  a  year.  Such  generosity  on  the  part  of  the 
state  might  serve  in  any  one  year  to  assist  New  York  City  in 
balancing  its  budget.  The  appropnations  of  the  state,  however, 
are  growing.  An  dastic  item  is  necessary.  There  should,  there- 
fore, be  no  excessive  optimism  that  the  city  will  benefit  heavily 
from  this  source  of  revenue. 

When  one  examines  the  possibilities  of  increasing  revenues  from 
sources  other  than  the  prop^y  tax  he  m  hnpmsoed  by  the  rela- 
tively favorable  situation  in  which  the  state,  as  compared  with 
the  city,  finds  itself.  Practically  all  of  the  taxes  of  this  character 
which  can  be  developed  advantageously  are  taxes  which  neces- 
sarily involve  statewide  appUcation  imd  administration.  For 
example,  a  municipal  personal  inc<»M  tax  or  business  income  tax, 
or  gasohne  tax,  could  not  be  introduced  with  any  expectation  of 
successful  administration.  It  would  be  possible  to  develop  further 
the  policy  which  the  state  now  follows  of  collecting  certain  taxes 
and  diaring  the  rev^ues  with  the  localities  on  some  more  or  less 
arbitrary  basis.  Your  Committee  fedbs,  however,  that  this  poUcy 
should  not  be  resorted  to  so  long  as  it  is  possible  to  solve  the  prob- 
lem by  leaving  to  the  cities  the  whole  or  a  considerable  part  of  the 
state's  tax  cm  real  estate,  which  carries  with  it  no  problem  of  al- 
location of  yield.  It  is  unnecessary  to  suggest  the  specific  forms 
of  taxation  which  the  state  could  utihze  to  counterbalance  the 
loss  it  would  suffer  by  reUnquishing  in  whole  or  in  large  part  the 
direct  state  tax.  It  is  sufficient  to  point  out  that  in  the  various 
reports  of  the  Joint  L^idative  Conmiittee  <m  Taxation  and  Re- 
trenchment as  well  as  in  the  report  of  the  Friedsam  Commission 
this  problem  is  discussed  at  length  and  several  fruitful  possibilities 
are  outlined. 

It  diould  be  pointed  out  that  the  city's  contribution  to  the 

state  through  this  direct  tax  on  property  falls  outside  the  consti- 
tutional two  per  cent,  limitation.  If  the  state  withdrew,  the  city 
could  use  only  that  part  of  the  former  state  levy  that  could  be 


Financial  Adionisitbateon:  RBCoiocENDAnoNB  ly 


broujght  within  the  two  per  cent,  limit.  It  might  be  the  whole,  but 
it  might  be  only  a  fraction. 

Special  Assessments. —Special  assessments  have  been  common 
in  New  York  City  for  many  years  and  have  undoubtedly  been 
accompanied  by  grave  abuses  at  certain  periods  m  its  history. 
At  the  present  time  there  is  no  settled  policy  in  force  as  to  the 
character  of  the  improvements  which  are  financed  by  special 
assessments.  There  is  likewise  no  settled  poUcy  as  to  the  pw- 
centages  of  cost  to  be  borne  by  the  property  in  the  immediate 
vidnity  of  the  improvement,  by  the  real  estate  of  the  borough  as 
a  whole,  and  by  the  real  estate  of  the  city  in  general.  It  is  the 
practice  to  pay  by  this  method  for  the  cost  of  acquiring  land  for 
streets  and  for  original  street  improvements  such  as  grading, 
curbing,  paving,  and  flaggmg.  The  cost  is  charged  to  the  property 
m  the  inomediate  vicinity,  except  where  the  street  or  boulevard  is 
clearly  of  more  than  local  significance.  It  is  not  the  practice  in 
New  York  City,  as  it  is  in  many  other  places,  to  meet  the  costs  of 
repaving  or  of  various  services  such  as  street  clewing,  street 
lighting,  etc.,  by  the  special  assessment  method. 

The  present  unsettled  policy  with  regard  to  the  share  of  the 
costs  to  be  borne  by  specially  benefitted  property  owners  as  com- 
pared with  the  portion  to  be  met  by  borough-wide  or  city-wide 
assessmmts,  C(mstitutes  a  standing  invitation  to  whittle  down  the 
Bpeml  assessment  system.   Qty  officials  are  under  a  constant 
pressure  to  absorb  a  larger  and  larger  portion  of  the  costs  of  pubUc 
unprovements  into  the  general  budget.    It  is  difficult  to  ovw- 
emphasize  the  importance  of  definiteness  in  the  announced  pohcy 
of  the  city  with  respect  to  special  assessments.  If  it  were  clearly 
understood  by  all  that  the  costs  of  certain  types  of  unprovements 
would  be  attached  directly  to  the  land  in  the  area  of  benefit,  the 
use  of  the  special  assessment  method  could  be  widely  extended 
without  involving  distress  to  property  owners.  Moreover,  there 
IS  much  to  be  said  for  the  use  of  the  method  from  the  point  of  view 
of  the  control  which  is  automatically  exercised  over  the  scope  and 
character  of  the  programme  of  pubUc  improv^ents.  Provided 
there  is  adequate  provision  for  the  titration  of  protests,  there 
18  little  danger,  under  a  special  assessment  system,  that  pubUc 


Ivi 


New  York  City^s  Finances  and 


improvements  that  are  not  really  desired  or  are  premature  will  be 
carried  through.  The  Ckammttee  favors  the  establisfam^t  <rf  a 
policy  of  financing  by  special  assessments  all  street  improvements 
including  repaving,  except  in  so  far  as  these  costs  can  more  fairly 
be  met  by  a  system  of  pricing  or  with  rev^ues  raised  by  taxes, 
such  as  the  gasoline  tax,  which  is  itself  an  approximation  of  the 
pricing  method.  At  present  the  policy  with  respect  to  the  financ- 
ing of  sewers  is  highly  indefinite.  The  Committee  considers  the 
special  assessment  method  well  adapted  to  this  type  of  improve- 
ment. 

The  method  of  financing  plants  fcM*  sewage  disposal  has  not  yet 
been  definitely  determined.  The  Committee  urges  the  desirability 
of  using  the  special  assessment  method  for  these  projects.  We  are 
of  the  opinion  also  that  the  possibility  of  financing  various  serv- 
ices connected  with  the  care  of  the  streets  by  special  assessments 
might  be  profitably  canvassed.  The  cleaning  of  streets,  the  care 
of  park  strips,  etc.,  are  in  many  cities  successfully  financed  in  this 
way. 

The  Ccnnmittee  regards  it  as  unfortunate  that  all  efforts  seem 
to  have  been  abandoned  to  utilize  special  assessments  in  connec- 
tion with  subways.  It  is  true  that  the  effects  of  subways  upon 
land  values  are  exceedingly  complex.  The  precise  limits  within 
which  special  assessments  may  be  soundly  used  are  not  known. 
Neverthdess  the  Committee  feds  that  the  location  of  new  subway 
lines  and  particularly  the  location  of  stations  result  in  an  entirely 
fortuitous  gain  to  the  owners  of  certain  pieces  of  real  estate.  This 
gain  might  be  recovered  through  the  adoption  of  the  special 
assessment  method.  Substantial  ccmtributions  toward  subway 
costs  could  be  obtained  in  this  manner.  The  adoption  of  this 
policy  within  the  restricted  scope  indicated  would  avoid  some 
criticisms  from  the  point  of  view  of  the  policy  followed  in  the  past 
with  reler^ce  to  the  old  subways. 

Jm  making  this  recommmdation  the  Committee  is  not  of  course 
suggesting  the  recapture  of  the  entire  increase  of  values  along  the 
hne  of  the  new  subways.  Such  increase  may  be  traceable  in  con- 
siderable part  to  the  general  development  of  the  city.  We  refer 
rather  to  the  possibility  of  recovering  at  least  a  part  of  the  ridi 


Financial  Administration:  Recommendations  Ivii 

profit  which  because  of  location  decisions  accrues  to  certain  par- 
ticularly favorably  located  plots. 

Furthermore  the  Committee  believes  it  would  be  possible  to 
work  out  a  plan  (iMeh  would  have  certain  advantages  over  the 
method  of  paying  in  considerable  part  for  subways  out  of  the 
general  budget)  whereby  a  portion  of  the  funds  needed  would  be 
obtained  from  a  tax  falling  upon  land  values  alone  rather  than 
upon  real  estate  in  general  including  the  value  of  improvements. 
A  modification  of  the  present  borough-wide  and  city-wide  assess- 
ments could  easily  be  made  so  as  to  bring  about  this  result. 

The  Pricing  of  City  Services.— The  Qty  <rf  New  York  has  an 
income  of  twenty-five  millmis  a  year  from  the  earnings  of  public 
service  enterprises.  These  include  the  water  supply,  municipal 
ferries,  and  municipal  railways  and  trolleys.  Approximately  5 
per  cent,  of  the  total  income  of  the  city  comes  from  these  sources. 
In  1916  public  sendee  eamin^i  represmited  6.6  per  cent,  of  the 
city's  income. 

Percentages  of  income  for  services  rendered  by  American  cities 
are  not  easy  to  calculate.  Different  accounting  methods  are  in 
use.  The  United  States  Coisus  figures  list  Detrort  and  Los 
Angdes  as  deriving  the  greatest  revenues  from  this  source— 
26.6  and  17.1  per  cent.,  respectively.  New  York,  according 
to  these  figures,  derives  7.1  per  cent.  Of  the  large  cities  only 
Chicago,  Philadelphia,  Boston,  and  Pittsbuigh  have  lower  per- 
centages.  A  discussion  of  these  matters  will  be  found  below.  * 

It  is  a  cause  for  regret  that  the  accounting  methods  now  used 
by  the  Department  of  Finance  do  not  reveal  more  clearly  the 
extent  to  which  the  prices  charged  for  various  city  services  are 
adequate  to  meet  the  costs  of  those  services.  Irrespective  of 
the  policy  to  be  followed  with  respect  to  pricing  it  is  strongly 
urged  that  the  accounts  of  the  city  be  so  arranged  as  to  show 
clearly  the  extent  to  which  costs  of  the  various  departzn^ts 
rendering  services  are  being  met  fr«»n  the  charges  imposed. 

Because  (rf  differmces  of  opinion  in  respect  of  the  general  bene- 
fits attaching  to  the  various  services  which  the  city  offers,  it  is 


*  See  pp.  132,  161  and  346. 


Iviii 


New  Yobk  City's  Financobs  and 


impossible  to  reoomm^d  flatly  that  all  city  services  should  be 
priced  so  as  to  3rield  a  revenue  equal  to  their  cost.  Generally 
speaking,  except  where  social  considerations  are  of  great  impor- 
tance, city  services  should  be  priced  so  as  to  meet  their  costs.  But 
views  vary  widdy  as  to  the  impOTtanee  of  the  social  oonsideratioiia 
involved,  particularly  in  respect  of  such  maiteis  as  subway  fares 
and  ferry  and  bridge  charges. 

The  Committee  recommends  that  in  the  case  of  all  inspection 
services,  fees  should  be  charged  which  would  be  adequate  to  cover 
the  expemes  involved.  As  is  shown  in  Appendix  L,  the  present 
system  of  charges  is  wholly  indefensible;  it  stands  in  great  need 
of  revision.  The  charges  in  many  cases  have  stood  unchanged 
for  decades.  They  are  quite  out  of  relation  to  the  costs  of  the 
services  and  are  imposed  in  such  a  haphazard  manner  that  some 
are  unduly  burdensome  and  scnne  unduly  light.  The  Committee 
hete  repeats  the  recommendation  hereinbefore  made  that  the 
practice  of  taking  revenues  derived  from  certain  of  these  charges 
and  placing  them  in  special  funds  be  abolished.  All  levemues  ct 
this  character  3hould  go  into  the  General  Fund. 

The  most  important  of  the  services  that  utilize  the  pricing 
method  is  the  water  supply.  Your  Committee  found  it  impossible 
to  ascertain  the  true  situation  from  the  records  as  now  kept.  If, 
whm  the  acooimts  are  restated,  it  develops  that  the  full  costs  at 
supplying  water  are  not  being  met  from  the  water  lAarges,  the 
rates  should  be  increased  to  a  level  that  will  make  this  service 
self-sustaining.  There  is  no  reason  why  water  rates,  which  are 
widely  shared,  should  not  bear  the  entire  cost  of  the  service  in- 
dhiding  that  portion  diarfeable  to  general  public  use  for  street 
cleaning,  fire  suppression,  and  the  like.  When  adequate  figures 
are  available,  material  readjustments  will  certainly  be  necessary, 
for  the  present  scales  of  chiurges  were  determined  forty  years  agQ. 

It  seems  obvious  that  metering  is  the  cmly  method  by  which 
chai^ges  can  be  accurately  determined  and  equitably  imposed. 
But  because  of  technical  difiiculties  involved  in  the  imiversal 
installation  of  meters  the  Committee  is  not  prepared  to  recom- 
mend this  step  at  this  time.  Where  the  construction  of  buildings 
already  erected  would  prevent  the  use  ci  meters,  it  is  suggested 


Financial  Administration:  Recommendations  lix 


that  the  charges  be  revised  upon  the  basis  of  water  consumption 
in  similar  buildings  in  which  there  are  meters.  It  should  be  possi- 
ble to  base  such  a  revision  upon  a  series  of  tests  of  actual  con- 
sumption where  ocmditions  are  presumably  similar.  Such  tests 
should  be  made.  It  is  further  recommended  that  plans  for  new 
construction  be  not  approved  if  they  do  not  call  for  an  arrange- 
ment  of  water  lines  that  will  permit  the  inst^tion  of  meters 
without  great  eiq)en8e.  The  general  policy  should  be  to  fix  rates 
as  equitably  as  possible  without  involving  disproportionate  ex- 
pense through  the  remodeling  of  plmnbing  or  the  use  (rf  an 
inordinately  large  munber  of  meters. 

Licenses.— AtimkUon  is  called  to  the  material  m  Appendix  L 
describing  the  present  system  of  licenses.  The  Committee  does 
not  approve  of  the  development  of  an  elaborate  system  of  licenses 
for  the  purpose  of  providing  a  large  net  revenue.  Nevertheless 
the  present  license  charges  stand  m  snious  need  of  levisioii.  They 
diould  be  examined  in  detail  with  a  view  to  making  them  con- 
sistent with  one  another  and  in  general  adequate  to  meet  the 
costs  of  any  special  facilities  furnished  to  the  licensees. 

Gasolim  Tax— Mention  has  been  made  above  of  the  possible 
utiUzation  m  connection  with  the  system  of  special  assessments 
of  cotain  types  of  taxes  that  closely  approximate  prices.  For 
example,  in  the  case  of  arterial  streets  the  definition  of  the  area  of 
special  benefit  presents  serious  problems.  Were  it  not  for  the 
insuperable  practical  difficulties,  the  principle  of  the  old  toll  road 
in  the  case  of  city  streets  would  present  attractions  from  the  point 
of  view  of  accurate  distribution  of  costs  in  proportion  to  benefit. 
With  the  virtually  complete  motorization  of  traffic  which  has 
come  about  in  recent  years,  the  device  <rf  the  gasotine  tax  offers  on 
the  whole  a  satisfactoiy  approximation  to  the  results  which  might 
be  achieved  by  a  system  of  tolls.  Such  a  tax  would  result  in  a 
burden  being  attached  to  the  user  of  the  streets  roughly  m  propor- 
tion to  the  extent  of  that  use.  This  suggests  the  desirabihty  of  the 
cHy's  urging  the  adoption  of  the  gasolme  tax.  It  should,  of  course 
be  administered  by  the  state;  it  would  be  unpractical  to  adminis- 
ter it  locally.  The  legislature  should  be  asked  to  levy  this  tax  at 
a  rate  which  would  permit  the  return  to  the  dty  of  a  maxk  twiffi- 


Nsw  YoBK  Crnr's  Financbs  aivd 


deiitly  large  to  contribute  substantially  toward  the  cost  of  the 

facilities  offered  by  arterial  streets.^ 

Tax  on  Unincorporated  Business  and  Abolition  of  Personal 
Property  Tax. — ^If  the  suggestions  heretofore  made  are  not  suflS- 
dent  to  meet  the  dty's  finandal  needs  and  if  in  oonsequenoe  it  is 
necessary  to  turn  to  general  taxation,  the  proposal  which,  in  the 
opinion  of  the  Committee,  demands  hrst  consideration,  is  the  tax 
on  imincorporated  business. 

As  the  result  of  an  evolution  which  has  been  under  way  for 
many  years,  the  old  general  property  tax  has  hem  completely 
changed  in  character.  The  property  tax  has  become  a  real-estate 
tax;  the  real-estate  tax  in  turn  has  become  almost  exclusively  a 
local  tax.  In  the  course  df  this  development  the  tax  has  come  to 
be  considered  less  and  less  as  an  index  of  ability  to  pay,  and,  moie 
and  more  as  an  index  of  benefits  received. 

Little  by  Uttle,  property  other  than  real  estate  has  been  elimi- 
nated from  the  tax  rolL  With  the  introduction  of  the  franchise 
tax  on  the  income  ci  coiporations  in  1916  an  imiKMrtant  part  <tf 
personal  property  was  excluded.  Similarly,  with  the  introduction 
of  the  personal  income  tax  in  1918  much  of  the  personal  property 
which  was  previously  hable  to  taxation  according  to  the  letter  of 
the  law  was  l^ally  exempted.  Today  the  remnants  of  personal 
prop^y  which  fifid  Omr  way  to  the  tax  roll  ecmstitate  an  insig- 
nifieant  part  of  the  tax  base.^  They  are  made  up  of  imrelated  odds 
and  ends,  the  principal  items  consisting  of  Uvestock,  certain  types 
of  machinery,  and  the  stock  in  trade  of  unincorporated  businesses. 
The  resulting  exemption  from  taxatioii  of  all  unincorporated 

1  It  is  now  estiinated  that  a  tax  of  one  per  cent,  per  galkm  would  yield  a  total 
levmiue  of  $10,000,000  per  year  to  the  state.  Presumably  it  would  be  fair  to  expect 
that  from  one-quarter  to  one-half  of  this  tax  would  be  returned  to  the  loeaUties  iqxm 

some  equitable  basis.  New  York  City  might  get  somewhere  between  one  and  two 
millions  from  this  source.  New  York  and  Massachusetts  are  the  only  states  that 
impose  no  gasohne  tax.  In  twenty  states  a  portion  of  the  revenue  from  this  source 
is  distributed  to  the  local  imits  of  government. 

The  Friedsam  Report  (Legislative  Document  92,  1026),  estimated  the  yield  on 
the  gasoline  tax  at  7  millions  for  each  one  cent  per  gallon.  The  rate  propoeed  by  the 
Special  Joint  Committee  on  Taxation  and  Retrenchment  in  1926  was  two  onts  per 
gallon  ("The  Gasohne  Tax,''  Legislative  Document  No.  69). 

2  In  1925  the  personal  property  assessed  in  New  York  State  amoimted  to  only 
1.41  per  cent,  of  the  total  general  property.  In  1890  this  percentage  was  10.12. 


Financial  Adminisisation:  Rbcommbndations  bd 

IwisineBS,*  has  been  a  powerful  obstacle  to  the  complete  aboUtion 
of  the  personal  property  tax.   As  the  system  of  taxation  now 
stands  there  is  the  general  tax  upon  real  estate,  a  general  tax  upon 
personal  income,  and  a  business  tax  also  based  on  income  but  re- 
stricted in  its  scope  to  corporations.  It  has  been  suggested  many 
times  that  a  fair  business  income  tax  should  be  as  broad  as  busi- 
ness  Itself.   There  is  httle  justification  in  a  business  tax  that 
unduly  discriminates  against  the  corporation.    Obviously  the 
next  great  steps  in  the  development  of  the  general  system  of  taxa- 
tion  m  the  state  and  municipafities  should  be  the  complete  aboU- 
tion  of  the  personal  property  tax  and  the  establishment  of  a  tax  on 
the  income  of  unincorporated  businesses  comparable  to  the  east- 
ing  tax  on  the  income  <rf  business  corporations.  The  two  steps 
must  be  taken  togedier.  As  its  first  choice  among  the  various 
general  taxes  that  might  be  resorted  to,  your  Committee  recom- 
mends a  tax  upon  the  income  of  unincorporated  business.  The 
rate  should  be  sufficiently  below  the  rate  imposed  upon  the  income 
of  coiporations  to  ocnnpensate  as  nearly  as  possible  for  the  ad- 
vantage ^ch  the  corporation  possesses,  as  compared  with  the 
mdividual  or  partnership,  due  to  the  privil^e  of  retaimng  m  the 
busmess,  free  from  individual  surtaxes,  its  undistributed  profits. 

Since  the  present  personal  property  tax  is  ahnost  entirely  a 
local  souree  of  revenue  the  Committee  feels  that  the  city  would  be 
justified  in  urging  that  the  locaHties  be  given  aU  of  the  yield  of  the 
proposed  new  tax  on  the  income  of  unincorporated  businesses.  The 
tax  would,  of  course,  have  to  be  levied  and  eoUeeted  by  the  state. 

It  18  now  estunated  diat  such  a  tax  on  the  incomes  of  unin- 
corporated businesses,  with  an  initial  exemption  of  J5,000  would 
yield  somewhere  between  4  and  5  miUions  a  year  f w  eadi  one 
per  cent,  of  the  levy.'  New  York  City's  share  of  this  would 

^^c^t  as  they  WW  reached  by  taxes  upon 

■  ITbe  1022  Report  of  the  Special  Joint  Committee  on  Taxatinn  an^  Tt^^r^^  u 


Ixii 


New  York  City's  Finances  and 


probably  be  considerably  more  than  one-half,  if  the  distribution 
were  made  upon  the  basis  of  the  location  of  the  business  reporting 
the  income. 

In  1927  the  personal  property  tax  in  New  York  City  produced 
a  httle  less  than  2  milUons  in  revenue.  The  net  result  of  the  rec- 
ommendation that  the  tax  on  personal  property  be  eUminated  and 
ihe  tax  on  unincorporated  business  be  substituted  for  it,  would  be 
that  the  city  would  probably  gain  considerably  in  its  net  revenues. 

The  Proposal  for  a  Tax  on  Out-of-Town  Visitors, — It  has  been 
suggested  that  a  promising  source  of  revenue  is  to  be  found  in 
some  type  of  tax  upon  out-of-town  visitors  levied  in  some  fashion 
in  connection  with  thdr  hotel  bills.  There  would  be  objections  to 
such  a  tax  from  the  hotels  who  would  be  called  upon  to  collect  it. 
There  are  also  the  objections  from  business  in  general  against  a 
tax  which  would  in  specific  form  call  for  a  payment  from  persons 
visiting  tiie  city  and  spending  their  money  here.  On  the  whole 
the  Committee  feels  that  the  revenue  wMch  could  be  obtained 
at  a  rate  not  unduly  burdensome  would  not  compensate  for  the 
costs  of  administration  and  the  irritation  and  nuisance  involved 
in  the  application  of  such  a  tax. 

Readjustment  of  Local  Share  in  Varioua  Statewide  TaaPM— Fi- 
nally, there  should  be  discussed  the  possibility  of  readjustoients 
in  the  shares  which  the  city  receives  of  various  state  taxes  and  in 
the  division,  between  the  state  and  the  city,  of  the  responsibihty 
for  ftniiiifiing  various  governmental  functions. 

Hie  situation  r^rding  the  taxes^  the  yield  of  which  is  shared 
between  the  State  and  the  localities  is  set  forth  in  Table  VI  and 
the  accompanying  diagram.  It  will  be  noted  that  from  1922  to 
1926,  New  York  City's  diare  in  such  taxes  increased  from  19  to 
29.1  million  dollars. 

greater  evasbn  a  five  per  cent,  tax  would  probably  be  only  four  times  as  productive 

as  a  one  per  cent,  tax  (p.  181).  The  Friedsam  Report  ("Financing  Education  in 
Cities,"  Legislative  Document  No.  92,  1926),  estimated  a  yield  of  3  millions  for  each 
one  per  cent. 

It  should  be  pointed  out  that  the  ooiporation  tax  rate  is  now  four  and  one4iaIf 
per  c^t.  and  that  if  this  is  not  increased  the  tax  on  uninoorpoiBtod  hnmrnmn  should 
not  be  higher  than  three  and  one-half  per  cent. 

1  Ezo^t  for  the  general  property  tax,  in  which  a  specific  levy  is  made  for  state 
purposes,  in  addition  to  the  load  levies. 


FufMXCUL  ADMINI8TIUTION:  Kkommendamons 


DlAORAM  n 
BXLATEONB  OF  CiTY  AND  StaTE  FinANCB. 


1915 
(Figures  in  millions 
•TMtts) 

7.4 


State  IkjBcs 


9  ^f£^5:£l^^*''5^^i? 


1  '^^$ii[Tiof^i 


f 


Receipts  Of  Stale 


Returned  to 


I 

i 


Ixiv 


New  York  City's  Financis  and 


I 


QQ 


Total 

29.8 

37.8+ 

27.5+ 

34.6+ 

41.5- 

31.6 

22.6+ 

33.4+ 

38.1- 

36.3- 

12.7+ 
19.9- 
24.1- 
25.5+ 
28.8- 

o 

Total 

14.8- 
18.9+ 
18.3+ 
23.1- 
27.7- 

+  +  +  1  1 

iO  ^  >— ' 

O         N  w 

S       ^  fH  1-1 

+  +  1  +  1 

i-(  05        CO  »0 
CO       CO  CO 

Division  of  Yieli 
Shark  of  Localitii 

Other 
Local  Units 

1  ++  1  1 

00  lO  CO  lO 

•       •       •       •  • 

^  «o  «D  OP  a» 

+   1     1   +  + 

CO  CO  a>^^ 

CO  ^  ^ 

1   ++ 1 

05  O  O  00 
^  CO  CO  ^  ^ 

New  York  City 

10.0+ 
12.4- 
12.0+ 
15.0+ 
18.2- 

1    1    1    1  + 

C5  CO  CO  CO  CO 

"l  ++++ 

CO  0>  i-<  ^ 
tH      C9  C4  C4 

Share  of  State 

•e  •«  •e 

+  1  +  + 

21.0 

15.1- 

22.3- 

25.0+ 

24.2- 

1  ++ 1  1 

CO  0)  o  0)  CO 

0»  <^  00  00  £ 

>* 

Oi  Oi  o>  Oi  a  ^ 

^  ^  «H  ^ 

1922 
19!23 
1924 
1925 
1926 
1927 

M  CO  Tt<  »0  CO 
CJ            (N  ^  S 
d  a  Oi  Oi  o> 

iH  fH  v-4  iH  fH 

Basis  for  Division  of  Yield 

Localities 

}4    of  re- 
mainder ac- 
cording to  as- 
sessed valua- 
tions of  real 
estate 

^  according 
to  location  of 
tangible  per- 
sonal proper- 
ty of  corpora- 
tions taxed 

}4  of  yield 
according  to 
county  of  reg- 
istration 

1 

$250,000  for 
refunds  plus 
}4  of  remain- 
der 

^    of  yield 
plus  all  inter- 
est and  penal- 
ties 

M  of  yield 

Title  of  Tax 

Personal  income 
tax  (Tax  law  Art. 
16) 

Franchise  tax  on 
income  of  busi- 
ness corporations 
(Tax  law  Art.  9- 

A)  1 

Motor  vehicle 
taxes  and  hcenses 
of  operators  and 
chauffeurs  (High- 
way law  Arts.  11; 
11-A,  Sec.  282) 

i 


FiNANCUi.  Administration:  Recommendations  Ixv 


1  + 1  + 

Oi  CO  O  05  o 

CO  O)  O  CSI  CO 
1-H  »H  »H 

0 

0.42 
0.46- 
0.61- 
0.72+ 

0 

0.03 
0.03 
0.03- 
0.03+ 

81.0 

90.2 

95.5 
111.7+ 
120.3+ 

+ 1  +++ 

^  00  O  lO 
1    CO  ^  U3  o  CO 

1  +  + 
_  ^  CO  o  CO 

O  O  0)  CO  CO 

•        •  • 

o  o  o 

1  <  1  1 
1  ao  to  CO 
1  £r  ^  1-H  *H 
I  O  O  O  O  O 

1                        •       •  « 

1  ooo 

+      1  + 
OS  1-1  ts.  ,H 

i-f  CO  o  OS 

CO  CO  TJ4  1^4  lO 

+        11  + 

1    1-1  O  Tt<  00 

1    »H     1-i  csi  f-i 

12.1 

14.8+ 

16.5+ 

19.8- 

20.5- 

+++ 1  + 

1  CO     CO  1-1  r^ 
1  csi  csi  CO  1^ 

O  O  fl^ 

1  o  o  »- 

+  +  +  1 
o  CO  o  »-»  eo 

05  1-H  Tfi  Oi  CO 
'-<  CM  CM  CM  CO 

1  +  +  + 

1        00  O  Tjt  »o 

1  CO  ^  «o  «b  CO 

0 

0.42 
0.23- 
0.30+ 
0.36+ 

0.03 
0.015- 
0.015- 
0.016- 

O  C4  K  to  04 

05  Ttt  Tj^  tf) 

^       lO  CO  CO 

<N  CO  Tj<  lO  O  tN. 

o)    o  oS  cS  cS 

1     iH  f-4  fH  fH  l-l  vH 

CO  rt<  »0  CO 

23  ^  S2  S3  <^^ 
Oi  Oi  Oi  a  a  Oi 

^  l-H  1-4  *H  *H  iP-4  1 

CO  ■'^^  CO  r>. 
^  ^  £J  ^ 

Oi  Oi  Oi  Oi  Oi  Oi 

«-4  1-4  f-4  «ir4  tpxl  1-1 

CV|  CO       »C  CO 

1"*       ^  *H  ^  11 

14  of  yield  ac- 
cording to  lo- 
cation of  prop- 
erty mort- 
gaged 

H  of  yield  ac- 
cording  to 
county  in 
which  col- 
lected 

H  of  yield  ac- 
cording  to 
county  in 
which  col- 
lected 

H  of  yield 

) 

o 

:^ 

Mortgage  tax 
(Ta.\law,Art.li; 

Licenses  of  real 
estate  brokers 
and  salesmen 
(Real  property 
law.  Art.  12-A) 

Licenses  on  bil- 
liard rooms  (Pe- 
nal law.  Art.  31) 

Total 

I 

.a 


CO 


2 
ca 

<s  . 

00  9 

*^  3 

00 


5 


O  o 

^  If 

o 


00 

o 

1— ( 


I 

o 
1 


2 


73 

00    -  ^ 

a 
s 

03 
QQ 


c 

-♦J 
o 
a 


l.s 

O  oft 
■♦^ 

a-^  O  cc 
s 


o 


Ixvi 


Nkw  Yobx  Crrr's  FiNANCBd  and 


An  attempt  has  been  made  by  the  State  Tax  Coiiimission  to 

B^egate  the  taxes  received  by  the  state  according  to  the  localities 
in  which  the  taxes  are  paid.  This  analysis  shows  that  in  1925,  the 
total  taxes  flowing  from  the  locahties  to  the  state  amounted  to 
198.8  million  dollars.  From  this  sum  the  state  passed  back  to  the 
locahties,  in  the  form  of  the  taxes  shown  in  the  table  and  in  the 
form  of  subventions  for  schools  and  roads,  the  sum  of  93.3  mil- 
lions. The  state  retained  105.5  milHons.  The  excess  of  collections 
from  New  York  City  over  redistributions  to  New  York  City 
amounted  to  68.3  miUions  m  1925.»  By  this  test  New  York  may 
be  said  to  have  supplied  about  64.7  per  cent,  of  the  financial  sup- 
port of  the  state  government.  New  York  has  52.6  per  cent,  of  the 
peculation  of  the  state  and  68.5  per  cent,  of  the  assessed  value  of 
real  estate.  These  figures  seem  to  show  that  the  present  state  tax 
system  does  not  discriminate  unduly  against  New  York  City. 

The  state  subventions  for  roads  and  schools  amount  to  very 
substantial  sums.  In  1925,  the  state  gave  the  localities  41.4  mil- 
lions for  sehods  and  5  millions  for  roads.  None  <rf  the  road  m<m^ 
was  given  to  New  York  City,  but  20.6»  millions  of  state  school 
money  came  to  the  city  treasury.  Moreover  this  siun  has  been 
greatly  increased  since  1925  and  is  scheduled  to  increase  still 
further.  In  1926  it  was  21.5.  In  1928  New  York  City  will  receive 
about  36.5  millions  of  state  school  money  and  within  three  years 
it  is  estimated  that  this  sum  will  reach  45.5  millions. 

The  present  basis  for  apportioning  the  yield  of  the  taxes  which 
are  shared  between  the  city  and  the  state  is  one  which  has  no  de- 
fmm  except  that  at  the  time  they  were  established,  the  particular 
fractions  represented  a  more  or  less  satisfactory  compromise 
solution.  It  is  impossible  on  any  abstract  ground  to  justify  an 
arrangement  whereby  the  city  receives  one-half,  and  not  two- 
thiids  of  the  personal  income  tax  collections,  and  one-third  instead 
of  two-thirds  of  the  proceeds  of  the  tax  on  the  income  of  corpora- 
tions. The  general  problem  is  one  that  will  probably  have  to  be 

^  Thb  eomqwnding  figure  for  1923  was  57.3  millioDS  and  for  1024  WM  64  miUioiia* 
t       wampasidiog  figures  for  earlier  years  are: 

1922—  17.9  millions 

1923—  18.7  millions 

1924—  19.6  millioiis 


Financial  Administration:  Recommendations  kvii 

feoed  in  the  near  future  and  New  York  City  should  be  prepared 
to  cooperate  with  other  localities  and  with  the  state  govmiment 
in  arriving  at  a  satisfactory  basis  of  division. 

If  the  distribution  of  state  funds  comes  more  and  more  to  as- 
«ime  the  charact«-  of  a  payment  for  performance  of  services,  it 
is  inevitable  that  the  state  should  assume  a  constantly  increasing 
mterest  in  the  manner  in  which  local  functions  are  performed. 
This  development  may  th^ore  be  expected  to  lead  to  a  redistri^ 
bution  of  functions  between  state  and  locahties.  This  trend  is 
already  apparent  in  the  field  of  pubUc  education,  and  to  some  ex- 
tent  in  poUce,  roads,  and  public  health.  The  degree  of  ccmipla- 
cency  with  which  such  devdc^nmts  wiU  be  viewed  wffl  depend 
largfiy  upon  indiralu^  opinions  regarding  local  self-government. 

The  Assessment  op  Real  Estate 
The  efficiency  of  the  assessment  of  real  property  in  the  city  is  a 
matter  which,  because  of  lack  of  facihties,  it  has  been  impossible 
to  mvestigate  in  any  comprehensive  fashion.  It  is  a  matter  of 
great  importance.  Some  data  have  been  presented  which  raise  the 
question  sharply  as  to  the  uniformity  of  assesanents  througjicnit 
the  city,  and  which  seon  to  indicate  a  matmal  disparity  in  as- 
sessment standards  in  the  various  boroughs.  The  Committee  is 
able  to  throw  no  light  at  aU  on  the  question  as  to  whether  there 
are  serious  discrepancies  among  individual  properties. 

The  State  Tax  Commission,  for  equaUaation  purposes,  esti- 
mates the  assessments  in  New  York  aty  at  the  present  time  to  be 
about  93  per  cent,  of  the  fuU  market  value.^  When  market  values 
are  rising  rapidly,  a  considerable  lag  must  be  expected  in  assess- 
ments; it  is  only  proper  that  the  valuations  mtered  on  the  tax 
rolls  should  lean  toward  amservatism.  Moreover,  where  specula- 
tive  movements  are  active  there  wiU  always  be  isolated  cases  of 
sales  greatly  in  excess  of  the  assessments.  The  technique  of  real 
estate  assessment  and  the  organization  of  the  D^iartment  of 
^xes  and  Assessments  in  New  York  City  have  for  many  years 
been  the  occasion  of  just  pride  among  the  citizens  of  the  city.  In 

fr.,  l^^lu^^u**"®        assigned  to  Manhattan  and  Brooklyn  in  1925.    The  ntn 
for  the  other  boroughs  were:  Bronx,  91%;  Queena,  80%;  BiebmoBd,  80%. 


Ixviii  New  Yobk  City's  Finances  and 

these  respects  New  York  City  hss  set  a  standard  for  the  entire 

country.  The  work  of  assessment  is  done  by  assessors  appomted 
for  indefinite  terms,  and  the  opportunity  exists  for  the  develop- 
ment of  the  peculiar  types  of  skill  and  knowledge  which  can  be 
hoped  for  only  whm  the  ofScers  have  pennanenoe  erf  tenure.  It 
is  perhaps  superfluous  to  call  attention  to  the  extreme  importance 
of  the  freedom  of  the  assessing  function  from  political  pressure. 
During  the  last  fifteen  years,  however,  revolutionary  forces  have 
been  at  work  in  the  city  which  have  {nrafoundly  affected  real 
estate  values.  The  war,  with  its  influence  on  the  rate  ci  intefest 
and  the  price  level,  the  introduction  of  the  pay-as-you-go  policy, 
the  annoimcement  of  far-reaching  improvements  and  subway 
projects  have,  for  example,  all  had  tiie  effect  of  oonoq^dicating  and 
disturbing  the  situation. 

The  Committee  suggests  that  a  comprehensive  study  of  the 
methods  of  real  estate  assessments  be  made  in  cooperation  with 
the  Departn^t  of  Taxes  and  Assessments.  This  study  should 
reveal  the  fullness  of  aflsessments  (so  that  a  larger  revenue  may 
possibly  be  obtained),  and  the  extent  to  which  they  reach  the 
standard  which  the  law  fixes.  With  the  city  operating  close  to 
the  two  per  cent,  tax  rate  limit,  it  is  desirable  that  the  assessments 
be  both  full  and  exact.  It  should  be  possible  through  the  seleo- 
tion  of  typical  areas  in  the  several  borou^  to  test  in  a  satisfactory 
manner  and  without  imdue  expense  the  fullness  of  the  assessments 
now  being  made.  When  all  taxable  property  makes  equitable 
and  just  contributions  to  the  city's  treasury,  there  can  be  no 
dause  for  cmnplaint.  Certainly,  howevor,  if  the  dtizens  of  New 
York  are  to  face  the  future  depending  ahnost  entirely  upon  the 
real-estate  tax  to  finance  a  great  programme  of  public  expendi- 
tures they  are  entitled  to  demand  that  this  tax  will  be  apportioned 
witii  scrupulous  equity.  Such  a  «irvey  ci  present  nnnenmrnmnts 
may  contribute  to  this  ^d. 

Separate  Tax  Bills  wor  Education 

Under  judicial  interpretation  of  the  law  the  Department  of 
Education  has  been  given  a  consideraUe  measure  of  financial  in- 
dependence over  against  the  appropriating  authorities  of  the  city* 


Financial  Administration:  Recommendations  Ixix 

lliis  results  in  part  from  the  long  since  inadequate  4.9  mills  that 
is  by  law  assigned  to  the  Department,  but  more  particularly  from 
the  rapidly  increasmg  state  subventions  for  school  purposes,  hi 
respect  of  the  disposition  of  these  subventions  the  Department 
has  successfully  clauned  ahnost  complete  control. 

The  appropriation  for  public  education  is  by  far  the  largest 
departmental  appropriation  m  the  budget.  In  1927  the  tax  ap- 
propriation for  education  was  27.9  per  cent,  of  the  total  budget, 
exclusive  of  D*t  Service.  Your  Committee  expresses  no  opinion 
upon  the  much-mooted  question  of  the  wisdom  or  unwisdom  of 
givmg  financial  independence  to  the  Department  of  Educatiim. 
In  view,  however,  of  the  large  share  of  tax  mon^  that  go  to  the 
Department,  and  mxm  especially  m  view  of  the  abeady  existing 
quasi-financial  mdependence  of  the  Department,  the  taxpayers 
are  certainly  entitled  to  a  plam  presentation  of  the  facts.  Un- 
hesitatingly, your  Committee  recommends  that  the  taxpayere 
should  receive  two  tax  bills— one  covering  the  amount  due  for 
education  and  the  othw  the  amount  due  for  other  city,  county  and 
state  purposes.  In  determming  what  part  of  the  tax  rate  is  for 
educational  purposes,  the  portion  of  the  Debt  Service  that  is 
referable  to  education  should,  <rf  course,  be  included.  Not  even 
tiiis  would  tell  the  wbcle  story,  for  such  bills  would  not  show  the 
amount  of  state  subventions,  a  very  considerable  part  of  which 
comes  from  the  taxpayers  of  the  city.  This  recommendation 
contains  no  impUcation  of  criticism;  it  is  pranpted  solely  to  the 
ead  <rf  the  tai^yer's  enli^tmmoit. 


Pboposbd  EzPBNDmrRBs  FOR  Public  Improvements  and  the 
Constitutional  Ten  Per  Cent.  Debt  Limit 

The  pubUc  improvements  aheady  discussed  wiU  be  financed  in 
large  measure  by  the  issuance  of  corporate  stock  or  serial  bonds. 
Calculations  have  been  made  of  the  Debt  Service  charges  which 
such  improvements  wiU  add  to  the  tax  budget.  Possible  difficulty, 
m  finding  mon^  for  Debt  Service  may  be  an  economic  barrier  to 
the  financing  of  costly  pubUc  improvements  by  borrowing.  The 
State  Constitution  may  set  up  a  legal  barrier. 


hz  Nsw  YoEK  Cmr's  Financobs  and 

New  York  City's  borrowings  are  limited  to  ten  per  cent,  of  the 

assessed  valuation  of  taxable  real  estate  in  the  city.^  This  consti- 
tutional provision  has  on  occasion  been  a  source  of  embarrassment 
to  the  city.  Is  it  likely  to  be  so  in  the  future  in  the  light  of  a 
programme  calling  for  capital  outlajns  of  one  billion  dollars  during 
the  next  few  years? 

The  possible  legal  debt  of  the  city  under  the  ten  per  cent,  hmit 
automatically  increases  as  the  assessed  valuations  increase.  In 
addition,  as  debts  become  due  and  are  extinguished  and  as  instal- 
wamis  are  paid  into  the  sinking  funds  to  apply  on  existing  debts, 
new  debts  of  corresponding  amounts  can  be  incurred  within  the 
limit.  In  estimating  whether  or  not  proposed  improvements  can 
be  financed  under  the  debt  limit,  account  must  be  taken  of  the 
present  unreserved  constitutional  borrowing  capacity,  the  future 
course  of  real  estate  values,  future  payment  of  debts  and  future 
payments  into  sinking  funds. 

From  Table  VII  it  appears  that  by  the  end  of  1932  the  city  will 
have  been  able  to  secure  an  increase  ci  805  millions  within  the 
constitutional  debt  limit.  The  hereinb^ore  estimated  pro- 
gramme of  pubhc  improvements  other  than  subways  calls  for 

TABLE  Vn 

Estimated  Effect  of  Five-Year  Programme  of  Financing  Public  Improve- 
ments Other  Than  Subways  Upon  the  Constitutional  Debt  Limit  of  New 
YoBK  Cttt  bt  tbb  End  of  1932. 

Millions 


Bcxnowing  capadly  under  the  debt  Hmit  Deoranber  31, 1927   117 . 6 

Increase  in  constitutional  borrowing  capacity  by  1932,  due  to  esti- 
mated debt  redemptions  and  contributions  to  sinking  fund  other 
than  for  new  subways   187 . 5 

humtm  in  constitutional  borrowing  capacity  by  1932  due  to  mUr 

mi^ed  inomse  in  taxal^  rad  estate  (10%  of  5  ImII^^  500.0 

Total   806.0 

Estimated  requiranents  for  5-year  programme  of  public  improve- 
ments ezdusiye  of  subways   454 . 1 

Differanoe  legal  debt  incunring  capacity  available  for  maw  subwajm. .  350. 9 


*  Bonds  issued  for  extensions  of  water  works,  docks  and  certain  other  purposes 
which  are  self-supporting  are  legally  excluded  from  the  ddbt  limit. 


FwANcuh  Administration:  RscoMifiNDATioNS  hri 


454.1  miUians.*  Thus  350.9  miUions  wiU  be  available  for  subway 
construction.  To  this  should  be  added  the  300  millions  (outside 
the  ten  per  cent,  limit)  recently  made  available  for  subway  pur- 
poses by  constitutional  amendment. 

Table  VIII  shows  in  detail  the  calculations  of  the  effect  of  the 
borrowing  programme  for  public  improvements  other  than  sub- 
ways upon  the  constitutional  debt  incurring  capacity  for  each 
year  from  1928  through  1932.  The  figures  for  the  "estimated 
increase  in  borrowing  capacity  due  to  debt  redemption  and  sink- 
ing fund  instahn«its"  were  obtained  from  the  Board  of  Esti- 
mate and  Apportionment  and  are  beheved  to  be  conservative. 
''Estimated  increases  in  borrowing  capacity  due  to  increased  real 
estate  assessments"  are  based  upon  the  actual  figures  for  1928 
and  the  Board  of  Transportation's  estimate  that  the  1932  as- 
sessed value  of  taxable  real  property  will  be  five  biUions  higher 
than  the  1927  figure.  The  figures  for  new  debts  to  be  incurred 
for  pubhc  improvements  are  based  upon  the  programme  given 
in  detail  in  Table  I.*  Kequiremmts  for  new  subways  and  for 
water  suppljr*  are  excluded. 

Table  VIII  shows  that  the  amount  of  new  debt-incurring  ca- 
pacity for  subways  is  estimated  to  be  350.9  millions  by  1933. 
With  the  300  miUions  made  available  by  constitutional  amend- 
ment the  total  is  increased  to  650.9  millions.  This  is  the  maxi- 
mum, however,  only  if  long-term  bonds  are  used.  U  short-term 
paper  is  issued,  the  total  amount  available  for  subwa3rs  will  be 
considerably  increased.  The  plan  of  the  Board  of  Transporta- 
tion abeady  discussed  proposes  to  issue  310  milhons  of  short 
term  bonds  by  1931  and  to  retire  97  miUions  by  1933.  During 
the  next  five  years,  therefore,  the  city  will  really  be  able  to  borrow 
a  total  of  743.9  milhons  for  subways.  The  Board  of  Transporta- 
tion plan  contemplates  the  retirement  of  224  miffions  of  bonds  in 
1934.*  It  thus  appears  that  during  the  next  few  years  the  city 

1  The  total  of  1062.1  millions  shown  in  Table  I  (p.  xxxvi)  less  500  miliiolis  for 
subway  construction  and  108  millions  for  water  supply  ooDstrocticm. 
■  See  p".  xxxvi. 

!  35**^  mibject  to  the  ten  per  cent.  hmit. 

retirempn^^lt^ff  ^^J'^'!^^  because 
be  fT!,^^^^^^  Since  the  bonds  will 

rather  than  for  the  smking  fund  paymeiitB. 


Ixadi     Nsw  Yobk  Citt's  Finances  and  Administration 


can  make  capital  outlays  of  nearly  a  billion  dollars  for  subwa3rs 
without  being  embarrassed  by  the  constitutional  debt  limit. 

table  vra 

Effect  of  Borrowing  to  Finance  Proposed  Public  Improvements  Other  Than 
Subways  Upon  the  Constitutional  10%  Debt  Limit  of  New  Yo«k  Citt. 

1928-1932 

Figures  for  Increase  in  TaxaUe  Beal  Property  are  Based  upon  the  Aetual  Figure 
1928  and  the  Bonid  of  TnmqiorUition's  Ertimate  for  1932. 


(MiUioDs) 


1928 

1929 

1930 

1931 

1932 

Borrowing  capacity  available  Deoonber 

4 

117.5 

201.0 

219.4 

227.5 

245.3 

Estimated  increase  in  borrowing  capacity 

due  to  debt  redemption  and  sinking 

fund  instalments  for  other  than  new 

subway  financing  (available  January 

Ut)  

32.5 

36.0 

S7.6 

40.0 

42.5 

Estimated  increase  in  borrowing  capacity 

due  to  increased  real  estate  anenments 

available  March  1st  

130.6 

67.3 

67.4 

67.3 

167.4 

Total  increases  in  borrowing  capacity 

280.6 

303.3 

894.3 

334.8 

455.2 

Len  reductions  in  constitutional  borrow- 

ing capacity  due  to  new  debts  to  be  in- 

curred for  publie  inqHovementa  other 

79.6 

83.9 

96.8 

89.5 

104.3 

Bidance  available  on  December  Slst  of 
each  3rear  (earned  forwaid  to  the  top 

201.0 

219.4 

227.5 

245.3 

350.0 

CHAPTER  I 


THE  FISCAL  STRUCTURE  OF  NEW  YORK  CITY 

New  York  City's  indebtedness  is  almost  equal  to  the  total 
OTtstanding  obUgation  of  the  forty-eight  states  of  the  Union. 
The  debt  service  charges  on  the  city's  funded  debt  now  amount 
to  $95,000,000,  more  than  the  total  budget  twenty-five  years  ago. 
In  1926  the  city  expended  $146,000,000  from  long-term  borrow^ 
mgs.   The  subway  debt,  actual  and  contemplated,  will  be  larger 
than  the  entire  debt  of  the  national  government  before  the  War, 
The  rapid  transit  trackage  is  sufficient  to  reach  nearly  to  Chicago! 
One  miUion  children  attend  the  city's  sdbools.   It  is  Uttle  wonder, 
therefore,  that  the  annual  turn-over  of  the  municipal  treasury  is 
two  bilUons  a  year;  that  in  1926  New  York  spent  $100,000,000 
more  than  did  Chicago,  Philadelphia,  and  Detroit  together,  and 
that  the  city's  annual  expenditures  of  more  than  half  a  billion 
are  larger  than  the  expenditures  of  the  national  government 
only  twmty  years  ago.   In  addition  to  the  half  billion  annually 
spent  for  local  purposes,  the  residents  of  New  York  contribute 
an  equal  amount  to  the  national  government—nearly  twenty- 
five  per  cent,  of  the  total  proceeds  of  the  income  tax. 

It  is  perhaps  trite  to  refer  to  the  city's  115,000  employees  as 
an  army,  but  as  a  matter  of  fact  this  army  is  as  large  as  the 
regular  military  estabhshment  of  the  United  States.  The  city's 
payroll  is  $235,000,000  a  year.  Few  great  industrial  organiza- 
tions  of  the  country  have  more  varied  activities  or  more  impor- 
tant problems.  The  city  is  a  huge  public  corporation  engaged 
in  the  business  of  furnishing  many  kinds  of  service  to  its  mhab- 
itants.  The  assessed  valuation  of  its  real  estate  subject  to  local 
taxation  is  nearly  fifteen  biUion  doUar»~not  far  from  the  total 
valuation  <rf  the  raiboads  of  the  country. 

1 


2 


New  York  City^s  Finances  and 


Such  a  huge  municipal  corporation  requires  an  elaborate  fiscal 
structure.  The  pages  that  follow  will  attempt  to  analyze  this 
structure  and  to  focus  attention  on  the  chief  problems  of  New 
York's  finances  and  financial  administration.  Such  a  task  has 
not  been  attempted  before.  Few  special  problems  have  been 
written  about,  and  the  fiscal  system  as  a  whole  has  never  been 
adequately  dealt  with  in  print.^  It  will  be  necessary,  therefore, 
to  include  much  description  in  order  that  the  analysis  may  be 
understood.  This,  however,  should  add  greatly  to  whatever 
value  the  present  volume  may  otherwise  have.  New  York^s 
problems  are  so  extensive  and  varied  that  it  is  difficult  for  a 
citizen  to  understand  the  questions  oi  public  poUcy  that  con- 
tinually arise.  The  best  mirror  of  the  work  of  the  city  is  the 
mirror  of  mimicipal  finance,  even  though  the  reflection  may  be 
frequently  dim  and  occasionally  distorted.  If  more  people  are 
permitted  to  peer  into  this  mirror  through  the  medium  of  the 
following  discussion,  it  will  be  well  worth  while,  entirdy  apart 
from  the  reforms  and  improvements  which  may  result  from  an 
examination  of  existing  practices. 

New  York  City's  fiscal  system  is  divisible  into  four  principal 
parts:  (1)  the  planning  of  current  operating  expenditures  of 
which  most,  but  not  all,  are  included  in  the  tax  budget;  (2)  the 
provifflon  of  the  revemm  to  meet  titese  expaiditures;  (3)  the 
planning  of  major  capital  inqm>vements  and  their  financing  by 
long  term  borrowings,  and  (4)  the  administration  of  the  funded 
debt  which  results  from  such  borrowing^. 

The  following  pages  will  deal  in  cimsidmble  detail  with  these 
four  major  aspects  of  the  city's  fiscal  system.  That  i^ystem  is 
administered  by  different  officers  and  organs  of  the  municipal 
government  and  can  hardly  be  understood  without  some  explana- 
ti<m  of  how  financial  authority  is  parcelled  out,  and  what  powers 
belong  to  which  officers  or  boards.  It  is  necessary,  therefore, 
at  the  outset,  to  describe  that  portion  of  the  government  of 
New  York  which  is  concerned  with  finance.   The  main  outlines 

>  A  poflsible  ezceptioii— Ma,  The  Finance$  cf  lite  Qtk$4  Km  York  (Golambia 
Uaivcraity  8todiw>--WMi  publiidMd  in  1914. 


FiNANciAi.  ADMiNumumoif:  Fiscal  SraucTURE  3 


may  be  fanuliar,  but  it  seems  desirable  to  redraw  them  here  for 
the  picture  is  so  compHcated  that  its  details  are  frequently  for- 
gotten.  ^ 

The  Financial  Administration  of  Nmw  York 

The  Board  of  Estimate  and  Apportionment 

The  Board  of  Estunate  and  Apportionment  in  one  sense  is  the 
upper  branch  of  the  municipal  legislature.^   Primarily,  however 

!k  u  has  sometimes  been  described 

as  the  board  of  directow  of  the  Municipal  corporation.  What- 
ever  the  proper  analogy,  there  is  no  question  that  during  the  last 
twenty  years  it  has  gradually  acquired  ahnost  complete  contiol 

of  the  city's  finances. 

Pi^dir?.??*^*^,^.^^  Comptroller, 
ftmdentof  the  Board  of  Aldermen,  and  the  five  Borough  Presi- 
dents. The  terms  of  all  members  are  four  years,  and  their  eleo- 
tion  takes  place  at  the  same  time.  Membership  in  the  Boaid 
is  ex-oiiao  and  the  members  receive  the  salaries  attached  to 

ZZJ^  Z^'^'^'r.  '^^  "'^^^  ^^^^  ^q^al  voting 

power  The  Mayor,  Comptroller,  and  President  of  the  Boaid 
of  Aldermen-the  three  members  elected  by  the  entiie  dty- 
i^^R^!!^,''''!'  "^il        ^'^^  Presidents  of  Manhattan 

^^^^"gh  Presidents  of 
the  Bronx,  Queens,  and  Richmond  have  one  each-a  total  of 
sixteen. 

All  action  of  the  Board  is  taken  by  reaolutions  adopted  by  a 

^t^^  twl  "'^^  "T'T  °'  '^^P*  '^rtab  financial 
matters,  which  require  twelve  votes  or  unanimity.  A  quorum 

of  l<^5%"^r,t  ^""t  Enabling  Act  passed  by  the  state  legislature  in  1924  fLaw, 
Of  1924  c.  363)  created  a  local,  bicameral  legislative  body  toid^  tL^w  * 

ordinate  S  bmnches  of  M^i&i^S  T?  "^P^'  ^- 
functions  untanaired    A,  o^J^J^  ^  *^  P'^t  Charter 

A«mbly,  tKLrf  of  bZ!^!-!  r        "PP«  -»«»««>  <rf  the  Municipal 


4 


New  Yokk  City's  Finances  and 


of  the  Board  consists  of  a  number  sufficient  to  cast  nine  votes. 
At  least  two  of  the  three-vote  members  must  be  present.  All 
the  members,  except  the  Mayor  and  the  President  of  the  Board 
of  Aldermen,  may  be  and  frequently  are  represented  by  thdr 
chief  subordinates. 

The  original  power  of  the  Board  and  the  one  from  which  it 
derives  its  name  is,  of  course,  the  preparation  of  the  budget. 
Close  contact  with  this  work  from  the  receipt  of  the  departmental 
estimates  in  August  until  the  submission  of  the  final  budget  to 
the  Aldermen  in  November  would  alone  make  the  Board  of 
prime  importance.   In  1901,  however,  the  Board's  powers  were 
further  enlarged  by  reason  of  the  abolition  of  the  Board  of 
Public  Improvements.    This  Board  had  consisted  of  all  the 
officers  who  were  members  of  the  Board  of  Estimate  plus  the 
fix  commissioners  m  charge  of  water  supply,  highways,  street 
cleaning,  sewers,  public  buildings,  and  bridges.   When  the 
Board  of  Public  Improvements  was  abolished,  the  supervision 
of  highways,  sewers,  and  pubhc  buildings  was  decentralized  and 
placed  m  the  hands  of  the  borough  presidents.   Control  over  all 
these  matters  was  transferred  to  the  Board  of  Estimate.  Three 
years  later,  in  1905,  the  control  of  franchises  was  added  to  the 
jurisdiction  of  the  Board.    A  shadow  of  this  power  still  belongs 
to  the  Aldermen,  but  the  Board  of  Estimate  now  has  power  to 
amend,  revise,  or  repeal  any  franchise  granted  by  the  Alderm^, 
and  it  has  sole  jurisdiction  over  franchises  for  the  use  of  streets 
for  purposes  of  transit  or  communication.    During  the  last  ten 
years  the  Board  has  also  had  charge  of  the  city's  zoning  regula- 
tions. In  1920  whm  the  dty  employees'  returfflnent  i^yst^  was 
created,  the  Board  of  Estimate  was  made  trustee  with  important 
discretionary  powers. 

Practically  all  matters  coming  before  the  Board  are  referred  by 
it  to  some  one  of  its  three  committees.  PubUc  improvement 
projects,  zoning  regulations,  and  grade  changes  which  would  affect 
the  city  map  are  dealt  with  by  the  Committee  on  City  Plan  and 
PubUc  Improvements.  The  distribution  of  the  cost  of  pubUc 
devdopmaits  on  the  benefited  property  is  entrusted  to  the  Com- 
mittee on  Assessments.  All  other  matters  go  brfore  the  Commit- 


FiNANciAL  Administration:  Fwcal  Stbuctubb 


« 


Nsw  YoBK  City's  Finances  and 


teeof  the  Whole  wMch  has  its  weekly  meetmg  day  and  its  lengthy 
printed  calendar  just  as  does  the  Board  itsdf .  This  Committee 

has  succeeded  to  all  the  functions  of  the  former  Committees  on 
Finance  and  on  Tax  Budget.  All  three  committees  consist  of 
the  entire  mmbership  of  the  Board.  The  advantage  of  such  a 
practice  is  in  the  greatar  use  of  deputies  which  it  permits  and  in 
the  larger  share  which  department  heads  can  have  in  committee 
dehberations.  Most  of  these  committee  sessions  are  open  to  the 
public  and  the  press.  In  addition  to  its  three  major  standing 
ocxmnittees  the  Board  has  nearly  thirty  spedal  oominittees,  com- 
posed in  some  cases  of  all  the  members,  in  other  cases  of  a  portion, 
and  in  still  others  of  departmental  officials  or  even  laymen. 
Reports  from  these  special  committees  are  referred  by  the  Board 
to  the  CcHnmittee  of  the  Whole. 

The  Board  qf  Estimate  StaJSf 

One  of  the  most  remarkable  features  of  the  Board  of  Estimate 
is  the  huge  staff  which  it  has  built  up  to  aid  it  in  its  work.  This 
organisation  has  a  pereonnd  of  msm  than  two  hundred  and 
costs  annually  over  half  a  miUion  dollars.  There  is  no  more 
important  or  influential  body  in  the  city's  fiscal  system;  on  the 
vast  majority  of  matters,  the  decisions  of  the  permanent  staff 
become  the  decisions  of  the  Board  of  Estimate.  The  work  of 
the  staff  is  divided  into  three  parts.  The  aetivitks  of  the  Chief 
Engineer  and  of  the  Division  of  Franchises,  while  extremely 
important,  need  no  discussion  here.  The  Chief  Engineer  has 
certain  duties  in  connection  with  general  assessment  projects 
which  will  be  mentioned  hder.^  The  remaining  functions  of  this 
elaborate  secretariat  are  under  the  general  supervision  of  the 
Board's  secretary.  He,  like  the  Chief  Engineer  and  the  en- 
gineers <rf  the  Franchise  Division,  is  appointed  by  the  Board. 
He  has  charge  of  the  records  and  minutes  of  the  Board  and  the 
preparation  of  the  weekly  calendars  which  frequently  are  docu- 
ments of  three  hundred  pages  embracing  a  thousand  or  more 
items,  and  oi  all  the  general  reporting  and  investigating  work 

» See  Chapter  VI,  p.  m. 


Financial  Administration:  Fiscal  SmucrusB  7 


as  weU.^  The  examuung  staff  is  among  the  most  important 
umts  m  the  entue  financial  structure.  Through  its  hands  pass 
practically  every  matter  which  even  remotely  affects  any  fiscal 
aspect  of  the  city's  operations.  Not  only  do  the  examine 
scrutmiae  aU  budget  proposals  and  aU  appUcations  for  other 
grants  of  money,  but  they  pass  on  salaries  and  grades,  on  speci- 
fications for  the  purchase  of  supplies,  and  on  contracts  for  per- 
manent improvements,  repairs,  and  replacements. 

The  budget  staff  of  the  Board  of  Estunate  and  Apportionment 
ocmaists  <rf  27  ezaminm,  11  engineers,  and  3  examining  inspectors, 
with  typewritmg  copyists,  computors,  etc.  These  are  attached 
to  the  office  of  the  Secretary  and  work  under  his  supervision 
and  that  of  the  Director  of  Contract  Supwvirion  and  Investiga- 
tions, who  is  appomted,  as  is  the  Secretary,  by  the  Board  of 
Estimate  and  Apportionment.*  All  but  a  half  dozen  of  the 
examiners  have  been  in  the  service  of  the  city  for  twenty  years 
or  more.  Many  of  them  are  exceptionaUy  weU-equipped  for 
their  tasks. 

The  Board  of  Aldermen 

The  Board  of  Aldermen  consists  of  sixty-five  aldennn,  elected 
for  two-year  terms,  from  single^n^ber  districts.  The  five 
Borough  Presidents  are  also  monbers  and  are  generally  repre- 
s^ted  by  deputies,  most  frequently  their  commissioners  of 
pubUc  works.  The  heads  of  the  city  departments  may  also 
attend  the  sessions;  indeed  they  may  be  required  to  attmd  if  the 
Board  so  desires,  but  they  have  no  votes.  In  practice  the  heads 
of  the  Mayor's  important  departments  attwid  infrequently.  The 
Mayor,  however,  stiU  exercises  the  right  to  initiate  ordinances. 

Most  of  the  powers  possessed  by  the  typical  city  councU  are 
not  within  the  province  of  the  Aldennen.  It  wiU  be  noted  that 

>He  18        as  aecretaiy  to  the  Board,  secretary  of  the  New  York  City  Em- 
Retirement  Imt  tliis  aq>eet  af  his  work  is  not  pertinent  here. 

t  Jf^      -^"^  V^^?'  ^  ^  ^''^  «f  sendee  and  con- 

tract  supervision  operating  m  connection  with  the  Board  of  Estimate  and  ApDortiaii- 
ment.  These  bureaus  were  created  during  the  Mitchel  administration  and  were 
^?T^  fu*^^  campaign  of  1917.  The  new  Board  of  Estimate  and  ApportionmS 
•b^ed^  two  bureaus  and  ftdded  the  employees  W  the  sfoff  qI  the  Aecretaiy 


8 


New  York  City's  Finances  and 


the  Board  does  not  even  participate  in  the  control  which  the 
Board  of  Estimate  has  over  franchiseSy  pubUc  improvements, 
md  street  development.  Only  in  a  few  restricted  cases  is  its 
approval  necessary  for  the  selection  of  sites  for  public  buildings. 

The  more  important  powers  of  the  Board  of  Aldermen  are 
financial,  but  of  these  the  crucial  ones  are  shared  with  the  Board 
of  Estimate.  Tbsee  powers  include  approval  of  the  dty  budget, 
the  authorization  of  the  tax  levy,  the  issuance  of  Corporate  Stock 
for  a  few  particular  purposes  and  emergency  Special  Revenue 
Bonds,  and  the  establishment  of  grades  and  compensation  of 
positions  in  the  municipal  service.  With  the  unanimous  consent 
of  the  Board  of  Estimate,  the  Board  of  Aldermen  may  release 
contractors  from  Uquidated  damages.  Independently,  the  Alder- 
men have  power  to  authorize  purchases  without  pubhc  letting 
for  amounts  in  excess  of  $1,000. 

Besides  these  financial  powers,  the  Board  has  a  number  of 
minor  powers  of  considerably  1^  significance:  the  naming  and 
renaming  of  streets,  the  establishment  of  markets,  the  granting 
of  various  permits  for  small  arms  practice,  the  construction  of 
vaidts,  the  use  of  streets,  and  the  holding  of  parades. 

Tlie  budget  is  the  most  important  subject  over  which  the 
Board  has  jurisdiction.  It  may  reduce  or  strike  out  items  but 
cannot  increase  them.  The  Charter  allows  twenty  days  for  the 
discussion  of  the  budget  and  makes  elaborate  provision  for  its 
adoption  without  the  assent  d  the  Board  at  tiie  ea^iratkm  of 
this  period.  In  actual  practice,  the  Board  of  Aldermen  passes  a 
$500,000,000  budget  in  twenty  minutes.  This  situation  is  not 
wholly  the  fault  of  the  Aldermen.  The  actual  preparation  of 
the  budget  takes  place  during  the  summer  months  when  they 
are  not  in  session.  It  is  true  that  the  departmental  estimates  are 
available  in  August,  but  by  the  time  the  Aldermen  resume  delib- 
erations in  the  fall,  the  budget  is  in  too  crystaUized  a  stage  for 
any  criticism  to  be  effective. 

The  Board's  power  to  fix  the  tax  rate  has  dwindled  into  one 
of  uncritical  assent.  The  Comptroller's  office  not  only  prepares 
the  information  on  assessed  valuations  and  the  amoimt  required 
to  meet  die  city  budget  and  the  state  tax,  but  it  actually  pre- 


Financial  ADMiNisTaATioN:  Fiscal  Structubb  9 

pares  the  report  of  the  finance  committee  of  the  Board  of  Alder- 
men. The  members  of  the  committee  receive  printed  copies  of 
the  report  less  than  half  an  hour  before  they  are  expected  to 
sign  it. 

The  Department  of  Finance  : 

The  Finance  Department  is  one  of  the  largest  departments  in 
the  city's  government.  It  employs  about  nine  hundred  people 
and  has  a  payroll  of  $2,500,000.  It  is  the  only  city  department 
headed  by  an  official  elected  by  the  city  at  large.  The  Comp- 
troller, besides  being  the  head  of  this  sizable  establishment,  is 
a  member  (with  three  votes)  of  the  Board  of  Estimate,  the 
Sinking  Fund  Commission  (which  may  not  do  business  without 
him),  the  Banking  Conmiission,  and  the  Board  of  City  Record. 
He  has  numerous  minor  assignments. 

The  Charter  prescribes  the  organization  of  the  Finance  De- 
partment. There  are  three  major  bureaus  and  four  separate 
divisions  of  lesser  importance.  The  Bureau  of  Accountancy 
headed  by  the  Chief  City  Accountant  has  two  divisions  which 
audit  receipts  and  disbursements.  Each  division  audits  items 
that  run  well  over  a  billion  dollars  a  year.  The  Bureau  must 
approve  the  accounting  procedure  of  all  city  departments. 

The  Bureau  of  Audit  has  an  even  more  burdensome  task.  Its 
Division  of  Audit  and  Examiners  keeps  track  of  the  operation 
and  accounts  of  all  city  departments.  The  Inspection  Division 
checks  all  goods  received  or  contracts  completed.  The  Central 
Payroll  Division  supervises  the  city's  payroll  which  has  115,000 
names  and  amounts  to  $235,000,000  annually.  The  Pay  Division 
handles  all  other  disbursements. 

All  bills  presented  to  the  city  must  be  accompanied  by  a 
voucher  from  the  department  concerned  certifying  to  the  ac- 
ceptance of  the  supplies  or  services  performed.  This  voucher  is 
unmediately  charged  against  the  proper  appropriation  or  other 
account.  The  Finance  Department,  however,  must  investigate 
or  inspect  the  services  represented  by  the  voucher  and  satisfy 
itself  as  to  the  correctness  of  the  bill.  It  has  the  power  to 
reduce  the  amount  if  it  deems  it  excessive.  Having  determined 


10 


N£w  YoBK  City's  Finances  and 


the  amount  which  it  will  pay,  the  Department  then  prepareB  a 
warrant  pmiitlmg  tiie  money  to  be  drawn  from  the  city  treach 
ury.  Hie  warrant  must  be  signed  by  the  Comptroller  and  the 
Mayor  or  his  chief  clerk.  The  check  which  is  part  of  the  warrant 
must  be  signed  by  the  Chamberlain. 

The  department  heads  are  required  by  the  Charter  to  keep 
within  thdr  appropriations.^  The  Comptrc^^  sets  up  appropria- 
tion accounts  on  the  basis  of  the  budget.  He  reduces  them  as 
vouchers  or  warrants  are  presented  against  them  and  debits  and 
eredits  them  as  budget  traosfero  are  made.  Cantraets  are  also 
legiBtered  with  the  Comptroller  and  the  accounts  are  accordingly 
encumbered.  Open  market  orders  are  reported  to  the  Comp- 
troller, but  are  not  entered  on  the  accounts.  It  is  possible  for 
a  d^iartment  to  exceed  its  approjniation  through  the  issue  of  open 
market  orders  which  are  le^  daims  against  the  city  provided  • 
the  appropriation  has  not  been  paid  out.  Merchants  may  thus 
be  forced  either  to  wait  until  the  department  secures  additional 
funds  or  to  file  a  daim  with  the  ComplaroUer.* 

The  Bureau  of  City  CoUecticms  has  reooitly  been  created  by 
merging  the  offices  of  the  former  Receiver  of  Taxes,  the  Collec- 
tor of  City  Revenue,  and  the  former  Collector  of  Assessments 
and  Arrearo  into  a  new  post,  that  of  City  Collector.  This 
Bureau  handles  praoticidly  all  the  cash  which  the  dty  receives 
in  the  course  of  the  year.  Finally,  the  office  of  the  City  Cham- 
berlain is  in  legal  contemplation  a  Bureau  in  Finance  Depart- 
ment.' The  Chamberlain,  however,  is  appointed  by  the  Mayor 
and  the  functions  of  his  office  will  be  considered  separately. 

The  minor  branches  of  the  ComptroUer^i  extensive  department 

*  Section  1542  of  the  Charter  provides: 

"It  shall  be  the  duty  of  the  heads  of  all  departments  and  of  all  officers  of  said 
city,  and  of  all  boards  and  officers  charged  with  the  duty  of  expending  or  incurring 
obligations  payable  out  of  the  moneys  raised  by  tax  in  said  city,  or  in  any  of  counties 
contained  within  its  territorial  Umits,  so  to  regulate  such  expenditures  for  any  purpose 
or  object,  that  the  same  shall  not  in  any  one  year  exoeed  the  amount  i^ropriated 
by  the  Board  of  fistimate  and  Apportionment  for  such  purpose  or  object;  and  no 
charge,  claim  or  liability  shall  exist  or  arise  against  said  city,  or  any  of  the  counties 
contained  wnthin  its  territorial  limits,  for  any  mm  in  WStm  oi  the  amount  appropri- 
ated for  the  several  purposes.  .  . 

*  See  below,  p.  116 

*  Charter,  Section  195. 


Financial  Administration  :  Fiscal  Structure  11 

include  the  Stock  and  Bond  Division,  the  Bureau  of  Law  and 
Adjustment,  the  Real  Estate  Division,  the  Division  of  En- 
gineering, the  Pension  Division,  and  the  Bureau  of  Municipal 
Investigation  and  Statistics.  Some  conception  of  the  extent  and 
vdume  of  the  work  of  these  divisions  may  be  gleaned  from  the 
fact  that  the  Comptroller  must  approve  all  real  estate  pur- 
chases,  and  all  market  and  other  leases  by  or  from  the  city. 
He  has  power  to  adjust  and  settle  all  l^al  claims  against  the 
dty  and  he  certifies  all  ill^l  dahns  to  the  Board  of  Estunate.* 
Notices  of  all  law  suits  must  be  filed  with  the  Finance  Department. 

The  Bureau  of  the  CUy  Chamberlain 

The  City  Chamberlain  is  appointed  by  the  Mayor  in  the  same 
manner  and  with  the  same  tenure  as  a  department  head,'  but 
his  office  is  established  as  a  bureau  of  the  Finance  Department.' 
The  duties  of  the  Chamberlam  are  fivefold:  (1)  to  hold  the 
moneys  belonging  to  the  city  and  to  the  various  counties  com- 
prised in  the  hmits  of  Greater  New  York;  (2)  to  act  as  custodian 
and  admmistrator  of  court  and  trust  funds,  generally  known  as 
equity  mon^;  (3)  to  act  as  fiscal  agent  for  the  Adjutant  Gen- 
eral of  the  state  in  the  distribution  of  military  funds;  (4)  to  act 
as  fiscal  agent  for  the  State  Board  of  Tax  Commissioners  in  the 
collection  and  distribution  of  the  mortgage  tax;  (5)  to  act  as 
trustee  of  civil  and  criminal  bafl  and  mechanics'  hens  paid  on 
court  order. 

The  office  staff  is  divided  mto  two  divisions:  the  City  Treasury 
Division  and  the  Equity  Division.  As  city  tieasum,  the  Chamber- 
lain is  the  dty's  banker  and  custodian  of  its  funds.  His  work 
has  come  to  be  largely  a  matter  of  caring  for  bank  deposits.  The 
checkmg  of  warrants  against  appropriations  is  handled  m  prac- 
tice by  the  Fmance  Department  with  some  auditing  by  the 

r^lS^'S^'*'  ^""^^"^  261  and  246  respectively.  In  the  case  of  legal  claims  the 
U)ny trolkw  uwi^y  pays  them  out  of  Special  Revenue  Bonds  without  any  report 
to  the  BoMd  of  EBtmuite  or  any  other  body.  Oaims  thus  settled  have  in  instances 
•mounted  to  hundreds  of  thoimiick  of  ddkm; 

*  Charter,  Section  194. 

» Charter,  Section  161,  If  6. 


12 


New  Yobk  Crnr's  Fimancss  and 


Ckmunisffloner  of  Accounts  on  behalf  of  the  Mayor.^  The 

Chamberlain  has  issued  no  separate  published  report  since  1916, 
but  the  Comptroller's  Report  carries  several  statements  pertaining 
to  his  work. 

All  city  revenues  are  received  in  ih»  name  c£  the  CShamber- 
lain,  but  he  is  not  the  sole,  or  even  the  chief,  receiving  officer. 
Taxes  and  assessments  are  paid  to  the  Bureau  of  City  Collections 
of  the  Finance  Department.  Water  revenues  are  collected  by 
the  Water  Roister.  Numerous  license  fees  are  received  by  the 
Department  of  licenses,  and  permit  moneys  are  gathered  in  by 
bureaus  scattered  through  the  various  departments.  In  a  few 
cases  these  receipts  are  turned  over  directly  to  the  Chamberlain; 
in  most  instances  they  are  deposited  to  ttyd  account  of  the  city 
in  banks  selected  by  the  Chamberiain. 

The  Chamberlain  has  complete  discretion  as  to  the  amount  to 
be  kept  on  deposit  with  any  bank  approved  by  the  Banking 
Commission,  of  which  he  is  a  member,  except  that  the  amount 
may  not  exceed  fifty  per  cent,  of  the  capital  and  surplus  of  the 
institution.  All  these  deposits  must,  according  to  the  Charter, 
be  subject  to  withdrawal  on  call  except  time  deposits  made  with 
the  approval  of  the  Comptroller  for  six  months.^  Schedule  A  of 
the  ComptraUer'a  Report*  contains  statements  showing  the 
amounts  on  deposit  with  various  banks  to  the  credit  of  the  city 
and  the  sinking  fimds.  The  daily  balances  vary  considerably 
with  the  receipt  of  taxes  and  the  sale  or  redemption  of  bond 
issues.  In  the  course  of  a  year  the  balances  will  run  as  low  as 
S25,000,000  and  as  high  as  $125,000,000*  On  December  31, 1926, 
there  was  $35,265,604.88  in  the  various  city  depositories — 
$28,036,641  to  the  credit  of  the  city  treasury  and  $7,228,963  to 
the  credit  of  sinking  funds.  The  Banking  Conmiission,  consist- 
ing of  the  Mayor,  Comptroller,  and  Chamberlain,  meets  each 

>  The  Commissioner  of  Accounts  is  required  to  make  an  annual  examination 
during  January  or  FekHruary  <rf  tbe  receipts  and  disburBements  d  the  City  Treasury 
and  reports  his  findings  to  the  Mayor  and  the  Board  of  Aldermen  during  the  follow- 
ing February.  (Proceedings  of  Board  of  Aldermen,  March  9,  1926,  p.  456.)  Theae 
reports  have  grown  more  and  more  brief  until  they  consist  merely  of  a  few  pages 
of  summaries  of  the  receipt  and  disbursement  accounts,  deposits,  and  bonowingk 

*  Charter,  Section  196. 

•  MS,  p.  330. 


FiNANcuL  Administration:  Fiscal  Structure  13 


quarter  to  designate  banks  as  city  depositories  and  establish  the 

rate  of  interest.* 

At  the  present  time  there  are  one  himdied  and  five  approved 
banks  but  d^>osit8  are  m  practice  kept  m  no  more  than  half  of 
these.  The  Chase  National  Bank  is  the  city's  clearing  house 
bank.  About  half  of  the  city's  deposits  are  kept  in  this  bank 
and  all  checks  are  drawn  upon  it.*  All  accounts  bear  two  and 
one-half  per  cwit.  interest  on  tl^  average  daily  balance  which  is 
paid  at  the  end  of  the  month,  except  that  the  Chase  Bank  pays 
two  per  cent,  on  the  first  $2,000,000  and  two  and  one-half  per 
cent,  on  all  above  this  amount. 

The  examination  and  checking  of  vouchere  and  the  prepara- 
tion of  warrants  are  the  work  of  the  Comptroller's  oflSce.  The 
Chamberlain  does  not  receive  the  warrant  until  it  is  signed  by 
the  Comptroller  and  the  Mayor.   Attached  to  the  warrant  is  a 
check  which  the  Chamberlain  dgns,  and  no  city  money  may  be 
drawn  from  the  city  treasury  except  on  such  warrant  bearing 
these  three  signatures.   The  Chamberlain  registers  the  warrants 
and  controls  their  issuance  in  accordance  with  his  bank  balances. 
When  the  warrants  are  returned  from  the  bank,  they  are  listed 
by  the  Chamberlain  and  audited  by  the  Finance  Department. 
All  these  warrants  aro  drawn  upon  the  Chase  National  Bank. 
Accounts  with  aU  of  the  other  banks  are  in  the  nature  of  re- 
serves, which  the  Chamberlain  may,  by  his  own  check,  transfer 
from  one  city  depository  to  another,  or  to  the  Chase  Bank  if 
the  money  is  to  be  paid  out  of  the  city  treasury.   The  Finance 
Department,  in  addition  to  auditing  the  warrants  paid  by  the 
Chamberlain,  makes  a  monthly  examination  of  the  Chamber- 
lain's bankbooks  and  receives  from  each  city  depository  a  certifi- 
cate of  the  amount  on  de^t  each  month.  The  Chamberlain 
batances  his  books  at  the  end  of  each  week,  month,  and  year 
a^  checks  them  with  the  statements  received  from  the  banks. 
The  Chamberlam  keeps  about  3,000  ledger  accounts  showing  the 

1927?^!^^**'^        ^  Minutes  of  tbe  Banking  Commission,  CUy  Record, 

aih^^""^  ^^"^  ""^^  large  accounts  of  two  or  more  miDioiie  eadi  and  several 
others  over  a  miUion.  Many  of  the  accounts  oontiined  ksB  than  SSOlOOO  and  six 
Iteld  but  110,000  (December  31,  laaft).  -wwan  w^uuu  ana  six 


14  New  Yobk  Crnr^s  EWncxs  and 


expenditures  ckarged  to  the  various  departments,  to  bond  issues, 
and  to  sinking  funds.  These  are  likewise  subject  to  monthly 
audit  by  the  Comptroller. 

As  County  Treasurer,  the  Chamberlain  is  trustee  of  various 
court  funds  and  militaiy  funds,  and  modyer  and  custodian  ct 
cash  bail.^  These  funds  are  received  and  disbursed  exclusively 
on  court  order.  The  Chamberlain  is  under  special  bond  to  the 
state  for  them.  There  are  at  present  15,000  of  these  separate 
trust  accounts,  aggre^ting  $10,000,000.  <  The  accounts  and 
operations  of  time  funds  are  not  included  in  the  ComptrMa^B 
Report  About  half  of  the  money  in  these  funds  is  in  banks 
and  the  rest  is  invested  in  bonds  or  mortgages.  The  interest 
on  these  investments,  of  course,  is  not  the  proper^  of  the  citji 
but  reverts  to  the  proper  trust  account. 

There  is  some  confusion  in  the  public  mind  as  to  the  utility 
of  the  Chamberlain's  office.  Former  Chamberlain  Bruere's 
much  heralded  and  much  misunderstood  recommendation  that 
his  own  office  be  abolished  was  not  intended  as  a  dnunatio 
gesture  of  economy,  but  as  a  step  in  the  direction  of  sounder 
administrative  organization.  What  he  really  urged  was  the 
inclusion  of  his  office  in  the  Finance  Department.  As  the  office 
now  exists,  its  sole  discretion  relates  to  the  distribution  of  de- 
posits. In  re(q)ect  of  receipts  and  disbursements  the  Chamber- 
lain's duties  are  purely  ministerial.  The  warrants  are  certified 
by  the  Comptroller  and  audited  by  the  Conamissioner  of  Ac- 
counts. Mr.  Bruere  thought  that  the  Chamberlain's  duties 
could  be  better  cared  for  by  a  peraiaiiipit  wibflrdinate  directly 
reqxjnsible  to  the  Comptroller. 

I*^  Cmmiasiomen  o/  ihe  Sinking  Fund 

The  Charter  provides  for  a  board  of  Conunissioners  of  the 
Sinking  Fund  composed  of  the  Mayor,  the  Comptroller,  the 
Chamberlain,  the  President  of  the  Board  ol  Aldemen,  and  the 

1  Charter,  Section  197. 

*  This  does  not  include  numerous  important  city  trust  funds,  e.g.,  the  Police 
Pension  Fund  (of  which  the  PoUce  Cofnmiaaioner  is  trustee),  the  Fire  Department 
Relief  Fund,  and  various  others. 


Financial  AniiiNiwratATioN:  Fiscal  SratrcTDBB  15 

S^firr°'?*,.^**^°^****°^*^^*''°dy  '  The  presence 
^  ComptroUer  is  essential  for  the  transaction  of  any  bua- 

ness.    These  commissioners  are  entrusted  with  the  admuustra- 
tion  of  all  of  the  sinking  fmids  of  the  dty.   The  work  is  of 
course,  of  a  relatively  simple  character.   It  consists  largely  of 
approvmg  pohcies  recommended  by  the  ComptroUer.   For  ex- 
ample,  on  February  9.  1927,  the  Commission  voted  to  accept 
three  resolutions  presented  by  the  Comptroller.   The  first  re- 
Med  to  the  sale  of  certain  aaeesmeDt  bonds  to  the  several 
retirement  boards;  another  "recommended"  the  fixmg  of  four 
per  cent,  as  the  maximum  interest  on  corporate  stock  issues 
to  be  sold  to  the  Sinking  Fund;  the  third  dealt  with  the 
investment  of  «35.000,000  available  cash  of  the  sinking  funds 
m  Coiporate  Stock  and  Serial  Bonds  of  the  city  The 
ri^OTto^and  the  accompanying  resolutions  were  ptomptiy 

More  important  than  the  duties  pertainmg  to  the  smkinK 
funds  are  the  powers  which  this  Board  has  over  the  city's  red 
ertate  holdings.  The  Commissioners  may  sell  at  auction  land 
owned  by  the  city  except  parks,  wharves,  and  land  under  water 
or  may  lease  land  for  ten  years  with  the  privilege  of  a  ten-vea^ 
renewal.'  The  body  has  other  ertensive  powers  ndatmg  to  bnd 
r^ZJ^'  ^^"^  «*«»t8,  the  removal  of  structures  on 
condemned  hmd,  clauns  arising  from  such  removals,  tax  cancella- 
tions for  rehgious  and  charitable  bodies,  the  sale  of  obsolete  bud- 
phes  and  eqmpment,  the  designation  of  court  houses  and  iaik 
and  exchanges  of  land.  ^  ' 

Rnt  J*?*? ^-  °^  ?f  ""^"^  ^""^y  ^  members  of  the 

Board  of  Estmiate  Most  of  its  functions  are  strictly  financial 
and  therefore  involve  matters  and  policies  for  which  the  Board 
rii-"^-  responsible.  Charter  commissions  and 

repeatedly  recommended  that 

vnese  two  bodies  be  consolidated. 

^  Charter,  Section  204. 
^j^Craig       Caam»«io««  of  th.  Sinkins  Btod.  208  N.  Y.  Jtapp.  236 

j^Charter.Seott«206.  Tl«  «u8t  be  umuuiwni.  oaii«t  to  diiipo« 


New  York  City's  Finances  and 


The  DiaredUjfr  0$  the  Budget 

The  office  of  the  Director  of  the  Budget  was  created  in  1928. 
It  is  not  a  charter  position  but  was  estabUshed  by  mcluding  the 
salary  in  the  1924  budget.  The  first  Director  was  appointed  in 
June,  1924.  The  office  takes  the  place  ci  the  q[>ecial  subcom- 
mittee of  the  former  Committee  on  Tax  Budget  of  the  Board  d 
Estimate  and  Apportionment,  which  existed  during  the  Mitchel 
administration  and  lapsed  in  1918.  That  subcommittee  con- 
sisted of  a  group  of  departmental  eaqwrts  repremting  the  mwor 
bers  of  the  Board  of  Estimate  and  Apporticmmoit  who  composed 
tlie  Tax  Budget  Committee.  The  pubUc  hearings  were  held  be- 
fore this  spetAal  subcommittee  of  staff  experts.  The  subcommittee 
did  not  have  authority  over  ext^isions  of  activities  or  certain 
salary  increases.  An  appeal  from  their  recommradations  lay  to 
the  tax  budget  committee  of  the  Board  of  Estimate  and  Ap- 
portionm^t  itself.^  In  some  respects  the  hearings  held  by  this 
subocnnmittee  were  more  thorough  than  anything  which  now 
takes  place. 

When,  in  1918,  this  subcommittee  passed  out  of  existence,  the 
Committee  on  Finance  and  Budget  of  the  Board  attempted  to  do 
much  of  the  work  itself.  This  never  proved  satisfactory.  In 
1922  the  Committee  on  Finance  and  Budget  was  abolished,  and 
the  Committee  of  the  Whole,  with  which  it  had  been  in  conflict, 
came  to  function  in  its  stead.  Meanwhile  the  Secretary  of  the 
Board  had  hem  assmning  some  of  the  functions  of  the  subcom- 
mittee. It  was  in  order  to  bring  the  work  more  eloeAy  under  the 
Mayor's  control  that  the  office  of  Director  of  the  Budget  was 
created.  He  now  performs,  in  the  name  of  the  Mayor,  much  of 
the  work  that  was  formerly  done  by  the  subcommittee. 

» The  personnel  of  this  subcommittee  in  a  typical  year  may  be  of  some  intowt  M 
indicating  its  general  character.   In  1917,  the  subcommittee  waa  composed  of: 

Robert  B.  Mclntyre,  Sup^rvlsiiig  Statistician  and  Examiner,  Bureau  of  Mumcipal 
Investigation  and  Statistics,  Department  of  Finance,  Chairman;  Leonard  M.  Wall- 
stein,  Commissioner  of  Accounts;  Albert  E.  Hull,  Assistant  to  the  President  of  the 
Board  of  Aldermen;  Tilden  Adamson,  Director  of  the  Bureau  of  Contract  Super- 
vision; Mrs.  Mathilde  C.  Ford,  secretary  to  the  Committee  on  Education,  Board  of 
Estimate;  Paul  C.  Wilson,  Assistant  Secretary  to  the  Mayor;  J.  W.  P.  Bennett. 
Consulting  Engineer,  Borough  President  of  Bnmz,  and  Geoi|e  W.  TOlson,  Oonmdting 
Emginew,  Borough  Ftead«it  of  Bnx^yn. 


Fdtakcial  Adionistbatiok:  Fiscal  Structure  17 


The  Director  of  the  Budget  has  no  staff  of  his  own  other  than 
one  or  two  clerks  and  a  stenographer.  One  of  the  examiners  of 
the  Board  of  Estunate  and  Apportiomnmt  has  be^  assigned  to 
the  office  and  makes  it  his  headquarters.  The  Director  of  the 
Budget  appears  at  all  meetings  of  the  Board  of  Estimate  and  its 
committees.  In  connection  with  all  matters  pertaining  to  the 
budget  work  he  d^iends  upon  the  staff  (rf  ezaminefs  <rf  the 
Secretary's  office. 

^  The  Duector  of  the  Budget  has  become  an  important  func- 
tionaiy  in  the  administration  of  the  city's  departments.  All  of  the 
Mayor's  departments  are  required  to  secure  the  Mayor's  pmnis- 
sion  to  communicate  to  the  Board  of  Estimate  and  Apportion- 
ment any  requests  for  transfers,  changes  in  salaries  or  grades, 
Tax  Notes,  or  Revenue  Bonds.  These  and  similar  requests  from 
county,  borough,  and  court  officers  are  now  referred  by  the 
Board  to  the  Director  of  the  Budget  for  his  approval.  Many  re- 
quests are  tranranitted  directly  to  him.  He  passes  on  salary 
questions.  Contracts,  on  the  other  hand,  are  referred  to  the 
Secretary  of  the  Board  of  Estimate.  Matters  assigned  to  both 
the  Du^tor  and  the  Secretary  ultimately  come  to  the  same 
examinmg  staff  of  the  Board  of  Estimate  and  Apportionment.* 

The  Cammiesianer  cf  Accounts 

The  Mayor  is  also  able  to  establish  contact  with  current 
finandal  operations  tiux)ugh  the  Commissioner  of  Accounts 
whom  he  appoints  and  may  remove.  The  Commissioner  of  Ac- 
counts has  ahnost  invariably  been  closely  identified  with  the 
Mayor.  His  function  is  much  broader  than  that  of  accounting- 
he  is  the  Mayor's  official  investigator.  Indeed,  in  order  to  safe-' 
guard  this  function  and  preserve  the  Commissioner  s  power  of 

rpf .'rS?^K  ^^l  !k  ^  T""^^^  budget  transfeiB  are 

tions.  Both  report  not  only  on  the  status  of  the  funds  but  on  the  desiiabiUty  of  Uie 
proposed  tmnsfers.  ^  Requests  during  the  last  few  months  of  the  year,  and  tho^ 

SS^^ti^f*^^  ^'^^T  refe^ed  only  to  the  Comptrdler  on  the 

^\*^^T^^  to  d^cwMidee  or  oveixirafts.  There  seems  to  be  no  good 
^terJ'^ff  r  ^''^l^^^^^jhom  not  have  authority  to  report  on  aU 
nmtte^  aflFectmg  dqpartmeiital  eqieoditum,  particulariy  those  relatiSog  to  the 


18  Nkw  Yobk  Cmr's  Finangm  and 


subpoena  the  office  was  by  a  Local  Law  in  1924  erected  into  the 

Department  of  Investigations  and  Accounts.  The  routine  duties 
of  the  office  consist  of  checking  all  warrants  drawn  upon  the  City 
Treasury  and  making  an  annual  examination  of  the  Chamberlain's 
bank  ledgm.  B^ond  this,  the  functions  of  the  Commissioner  are 
capable  of  indefinite  expansion  in  accordance  with  the  desires  of 
the  incumbent  or  the  Mayor  who  selects  him. 

Other  Fiscal  Agencies 

In  addition  to  the  foregoing  major  boards  and  d^>artmentSy 
there  are  a  number  of  other  fiscal  agencies.   Some  of  these  are 

treated  briefly  here,  not  so  much  because  they  are  less  impor- 
tant, but  because  their  work  is  explained  in  detail  in  later  chap- 
i&C8  and  has  rdatively  minor  significance  in  connection  with  the 
work  of  the  other  financial  oi^ans  of  the  city's  government. 

The  Board  of  Taxes  and  Assessments  is  a  bi-partisan  body  of 
seven  Commissioners  appointed  by  the  Mayor.  They  are  vested 
with  complete  power  over  the  valuation  of  real  and  personal 
property  in  the  city.^  The  distribution  of  the  cost  of  such  local 
or  general  improvements  as  are  to  be  borne  by  the  benefited 
property,  is  assigned  to  three  different  offices.  The  Board  of 
Assessors  handles  street  improvements.  The  Bureau  of  Street 
Openings  in  the  Law  D^Mtrtment  looks  after  the  costs  of  acquiring 
streets.  The  general  city  or  borough  assessments,  a  feature 
peculiar  to  the  financial  system  of  New  York  City,  are  handled 
by  the  Board  of  Estimate  upon  the  advice  of  its  Chief  Engineer, 
llie  work  of  all  three  of  these  agencies  is  described  below.' 

Purchasing 

The  spending  of  the  city's  money  for  supplies  is  a  task  of 
considerable  importance.  It  is  divided  among  four  distinct  and 
independent  agencies.  The  largest  vdume  of  purchases  is 
negotiated  by  the  Department  of  Purchase.  This  is  not  strictly 
a  purchasing  department,  but  rather  a  price  getting  agency  for 
tiie  Mayor's  departments  which  actually  spend  the  appropriated 
money.  The  Board  of  Education  has  its  own  Bureau  (d  Supplies. 

» See  Chapter  VI,  p.  169.        «  See  p.  177  et  seq. 


Financial  Abiunibtration:  Fiscal  Structure  19 

Printing  and  stationery  is  largely,  but  not  completely,  handled 
by  the  Board  of  City  Record,  an  ex-officio  body  consisting  of  the 
Mayor,  the  Comptroller,  and  the  Corporation  Counsel.  Finally, 
the  various  Borough  Presidents'  offices  do  their  own  purchasmg! 
A  separate  chapter  is  devoted  to  this  subject.^ 

Tax  Budget  Expenditures 

The  outline  given  above  of  the  various  agencies  concerned  with 
the  financial  admmistrati<m  of  New  York  has  indicated  in  part 
the  manner  m  which  current  operating  expenditures  are  planned 
and  made.  The  form,  content,  and  procedure  of  the  budg^  will 
be  dealt  with  m  much  greater  detail  in  the  following  chapter. 
Here,  however,  it  is  worth  whUe  to  mdicate  the  general  manner 
in  which  the  tax  budget  expenditures  are  apportioned.  Table  I 
gives  a  functional  grouping  of  expenditures  from  1925  to  1928. 

Two  wammgs  are  necessary  m  connection  with  this  table  and 
the  aoccmpanying  charts.  In  the  first  place,  New  York  City^s 
appropriations  are  made  to  operating  units  and  not  to  functions. 
The  groupings  here  employed  are  those  of  the  Fmance  Depart- 
ment. Secondly,  the  figures  used  are  those  of  appropriations  and 
not  of  amounts  actuaUy  spent.  They  thertfoie  fail  to  show 
precisely  the  operations  of  the  departments.  They  take  no 
cognizance  of  transfers  of  money  within  the  budget  after  its 
adoption  or  of  unexpended  balances  at  the  close  of  the  year. 
They  do  not  show  the  amounts  which  departments  expended 
from  other  than  tax  budget  funds.  Charts  II  and  III  indicate 
the  relative  apportionment  of  expenditures  between  the  various 
functions  smce  1915  and  their  individual  rates  of  growth.* 

GsNiaiAL  IlBVEmTBS 

tive  per  cent,  of  the  money  which  the  city  raises  for 
Its  expenditures  comes  from  a  tax  on  real  and  personal  property. 
Ihe  fiscal  unportance  <rf  this  tax  and  the  method  of  admmister- 
jng  tto  assessments  upon  whicA  it  is  based,  are  explained  at  some 
length  m  Chapters  V  and  VI.   Here  it  is  desu-able  to  mdicate 

*  See  Chapter  IV,  p.  103. 

*  A  taUe  suwwrtiiig  thew  ch^ 


20  New  Yobk  City's  Finances  and 

TABLE  I 


Tax  Budget  Appropbiations,  1925-1928 


1M6 

1887 

General  Admuustntkm  .    .  . 

16,186,706 

$6,206,720 

$6,622,956 

Legislative  

585,556 

596,436 

M  ^^^^^^ 

648,890 

Judical  and  Sraoi-^iidiiiial  . 

15,846,743 

16,417,676 

18,398,244 

84,129,208 

87,073,149 

89,516,073 

Parks  and  Parkways  •    .    .  . 

3,917,266 

4,331,792 

4,540,269 

Museums,  etc.  

1,939,914 

2,097,203 

2,225,592 

He&ltli  Oonservation  _ 

8.475.860 

8.927.279 

9,972,196 

SBDitatkm  ....... 

27,007,884 

28,648,293 

31,319,288 

Water  Smmlv  

3.258.860 

3,482,246 

3,698,734 

Protectioii  of  Life  and  Propeiiy 

62,713,797 

64,408,523 

70,380,340 

Correctional  Purposes 

2,259,829 

2,388,420 

2,577,918 

Charitable  PurpK)ses  .... 

20,051,118 

20,810,436 

21,606,217 

Streets,  Highways  and  Bridges  . 

10,727,785 

11,480,423 

19,637,709 

Public  Enterprises  (Docks,  Femes, 

T^RBOsity  etc.)  

6,101,948 

6,672,788 

12,338,655 

PoMic  Buildings  and  Qffiees 

4,547,638 

5,097,286 

5,951,248 

Board  of  Elections  .... 

1,886,299 

1,917,887 

1,880,412 

Publication,  AdvertisiDg  and 

Printing   

1,548,596 

1,701,452 

1,905,513 

Taxes  and  Rents  

1,400,668 

1,458,919 

1,506,319 

Pensions  and  Relief  Funds,  etc.  . 

12,203,016 

13,180,389 

13,963,406 

MisoeUaneoas  

1,055,381 

1,249,009 

2,596,066 

Total,  Gxiimui*  Goyebn- 

MBNT  

$275,842,080 

$288,146,333 

$321,270,074 

Debt  Service: 

Interest  cm  the  Funded  Debt 

$65,713,827 

$60,027,186 

$66,800,397 

Bedemption  of  the  City  Debt 

15,373,453 

18,738,795 

19,546,157 

Amortisation  of  the  City  Debt 

8,260,000 

9,150,000 

11,350,000 

Redemption  of  Tax  Notes 

7,000,000 

18,500,000 

16,600,000 

Redemption  of  ^>ecial  Revenue 

13,250,000 

17,750,000 

19,000,000 

Interest  on  the  Temporary  Debt 

3,909,953 

3,856,873 

4,100,000 

ToTAii  Dam  Sdivicb  .  . 

$103,497,232 

$128,020,854 

$137,356,554 

$16,236,971 

$17,564,808 

$12,622,697 

Tax  Deficiency  

2,990,000 

2,880,000 

3,250,000 

Qasson  Av^ue  Sewer  Assessment 

387,943 

388,003 

387,973 

Total  Tax  Budget    .  . 

$399,618,855 

$437,000,000 

$474,893,300 

Financial  Administration:  Fiscal  Structure 


21 


CHART  n 


N»w  ToBK  Cmr's  Tax  Budget  Appbopsiations  fob 
Shjbctbd  Yeabs,  1916  to  1927 


Debt 
Service 


1927 


22 


New  York  City's  Finances  and 


CHART  III 

Ommrm  or  tbm  Cm*B  E3CPBNiTi7iiis  bt  FuNcnoNs,  Silbcibd  Ybabs 

1915  TO  1927 


Am  i9iA  19^7 


FiNANGiAL  Abionibtration:  Fiscal  Stbuctube  23 


TABLE  n 


Gbnbral  PiTND,  1925-27 


1925  1 

1926  » 

1027  > 

CaaA  balanee  Jon.  1  

1  9W,7HJB7o 

 _ 

810,S48,H» 

i0^7J88 

City  share  of  state  lUM 

15,040,733 

18,186,433 

6,552,933 

6,887,426 

Moneyed  capital  tax 

1          1102  344, 

IKK  C  O 1 

loo,bol 

Corporatioiis  tax  

7,562,092 

7,641,698 

Motor  Tohide  tax  

2,409,464 

f       A  A  1  \j  ^#  V-' 

2,724.060 

Keai  estate  brcMEMSr  tex  , 

314,083 

06,538 

4,061,540 

4,722,021 



2,954,878 

3,186.098 

rvmnB  and  licenses  ....... 

1.061,714 

1.718.308 

water  rates  (Brooklyn,  Queens,  and  Richmond)  . 

1,327,146 

1,491,021 

Penaltsr  oo  Taxes  i 

3.613.925 

3,975.931 

Interest  on  nnnnsBiiwinta 

1,387,818 

1.934,758 

A 

1,07«,381 

1.876.007 

w 

T 

oWMliiy  rwuf  Receipts 

iNTHBasT  Sinking  Fitnd 

E 

Com  on  hand  Jan.  t  

t,lS7,Slt 

8,888,701 

s 

Water  rates  and  interest  (Manhattan  and  Bronx) 

11.881.580 

12,472.664 

T 

Municipal  ferries,  fares  and  privileges  .... 

3,149,344 

3.299.985 

I 

Peny  leases  '  \ 

566.999 

471,417 

M 

Rents,  house,  ground,  ete.   1 

£08.450 

iSAO  cm 

002,009 

A 

Fees,  fines,  etc  '  \ 

3,114.213 

2,250.773 

T 

Intereat  on  Snking  Fond  balanoea  1 

65,769 

59,638 

E 

Revenue  from  investment  1 

11.250 

17,260 

D 

Let*,  Payments  and  rounds   .    .                  *    *  1 

188,916 

164,626 

Cath  balanee,  Dee.  81  

8,888,701 

1,660,000 
84188,881 

f 

Suplui,  transferred  to  Smldnc  Fund  No.  1    .  1 

16,900,000 

17,400.000 

N 

RsDxifFnoN  Sinking  Fund  No.  1  1 

CuA  on  hand  Jan.  1    .    .    .    ,  1 

218.568 

1,381,153 

Dock  and  ship  rents  ••.••,,,,1 

7.004,215 

7,206.959 

D 

Market  rents  and  wagon  fees     ...***  1 

460,136 

460.844 

E 

 1 

728,791 

774,994 

T 

"ewses  

734,936 

783,092 

A 

Permits,  street  vaults   1 

382,476 

300,862 

I 

Fines,  privilei^  and  miscellaneous  ...  1 

26,650 

21.562 

L 

Interest  on  Sinking  Fund  bank  balances    ...  1 

151,715 

40.124 

Interest  on  City  Treasury  bank  balances   .    ]    !  1 

680,996 

787,441 

Revenues  from  investments  ...                 *  1 

532,449 

579,892 

Interest  on  General  Fund  Bonds     .....  1 

14331.684 

16,409,603 

Surplus  of  Interest  Sinking  Fund     .    .    .    *  | 

16,900,000 

17.400,000 

Sale  of  investmoits  

1.002.260 

587,308 

Lett,  Redemption  ,  1 

ijnojno 

1,076,049 

Refunds  and  Miecdlaneoiu      ...  1 

8JU8 

17,343 

Inteatmenta   1 

Cash  Balanee  Dee.  31    .    .  1 
^IVaiitf erred  to  Goieral  Fund  through  purchase  of 
General  Fund  Bonds  

Total  General  Fund  i    i  ' 

Less  Interest  on  General  Fond  TUMwil 
Cash  Balance  Dec.  31  

1,881,188 

41,000,000 

270,000 
2,120,442 

43,250,000 

47.000.000 

100,266,226 
14,831,685 
10,342,113 
1,600,000 

108.188,642 
16,409,603 

9,567,239 
1,500,000 

18J988^ 

ABBobiw  Tax  Deduetioiit  

OaHAkAi.  Fdxd  aM>lied  to  reduotkm  of  f^Tntfon  j 

73,502,504 

80,711.801 

80,910,238  « 

*  From  Comptroller's  Report  for  1935,  passim. 

in  Fe  W^'^S^'Soi.^S^  Note  that  theaefip«,««aatav«l.We«ita  late 

•Ibid. 

ef  i!L!?[??.  i  Sf  ^^"^"^  Committee  of  the  Board  of  Aldermen.  March  1,  1927.    The  Boaid 

Of  Brtiinate      only  Ite  oim  tii~  at  theae  fiw 


24  New  Yobk  City's  Finances  and 


the  lelatioii  of  the  property  tax  to  the  other  features  of  the 

fiscal  system. 

In  addition  to  the  property  tax,  the  city  has  various  miscel- 
laneous revenues  whose  nature  and  relative  importance  are  dealt 
with  later.  The  annual  total  of  these  revenues  and  receipts  is 
approxunately  $125,000,000.  Of  this  approximately  $80,000,000 
go  either  directly  or  indirectly  into  the  General  Fund  of  the 
City— "the  General  Fimd  for  the  Reduction  of  Taxation."* 
The  General  Fund  is  deducted  from  the  amount  required  to 
meet  the  tax  budget  and  the  property  tax  rate  necessary  to  care 
for  the  balance  is  calculated  in  a  manner  to  be  described  presently. 

The  General  Fund,  as  has  just  been  said,  is  replenished  directly 
and  indirectly.  The  indirection  arises  from  the  fact  that  a  large 
portion  of  the  miscellaneous  revenues  of  the  city  is  pledged  to 
two  sinking  fimds  which  antedate  the  establishment  of  Greater 
New  York  in  1898.  Payments  to  these  funds  soon  became  far 
larger  than  was  necessary  for  the  amortization  of  the  bonds 
which  the  sinking  funds  supported.  In  1903,  therefore,  a  system 
was  worked  out  by  which  the  surpluses  of  the  sinking  funds 
would  be  released  to  the  General  Fund  in  exchange  for  General 
Fund  Bonds.  The  two  sinking  funds  are  the  Interest  Sinking 
Fund  and  Sinking  Fund  Number  1.  The  surpluses  of  the  former 
are  transferred  to  the  latter.  The  ccanbined  surpluses  of  both  are 
exchanged  from  the  latter  for  General  Fund  Bonds.  Thus  the 
General  Fimd  receives  payments  which  are  not  direct  and  which 
are  effected  through  certain  bookkeeping  transactions.  What 
happens  is  indicated  in  Table  II,  which  shows  the  amounts  paid 
into  the  General  Fund  from  miscellaneous  revenues  and  incfi- 
rectly  after  transit  through  the  sinking  funds.* 

Assessment  of  Property;  Tax  and  Debt  Limit 

The  property  tax  extends  with  certain  exceptions  to  all  real 
and  pmonal  property  in  the  city.'  The  assessment  is  predi- 
cated on  what  is  presumed  to  be  full  value.  The  calculation  of 
values  is  the  work  of  the  Department  of  Taxes  and  Assessments. 

1  The  remaining  forty  millions  go  to  special  funds.    See  below,  p.  63. 
» The  transaction  is  explained  more  in  detail  below,  pp.  195  S. 
•See  below,  p.  139. 


Financial  Abionibtration:  Fiscal  Structube  25 


The  accuracy  and  completeness  with  which  this  task  is  carried 
out  are  of  the  utmost  importance.    The  Department  of  Taxes 
and  Assessment,  through  its  determination  of  values,  determines 
the  proportionate  amounts  that  individual  owners  must  pay. 
MOTe  important  than  this,  however,  is  the  fact  that  the  total 
values  thus  established  determines  the  city's  tax  and  debt  limits. 
The  State  Constitution^  limits  the  rate  of  taxes  which  may  be 
levied  for  city  and  country  purposes  exclusive  of  interest  and 
amortization  charges  on  the  funded  debt,  to  two  per  cent,  of  the 
assessed  valuation  of  real  and  personal  property,  subject  to  taxa- 
tion for  county  and  state  purposes.    The  same  section  of  the 
Constitution  fixes  the  net  amount  of  debt  which  the  city  may 
incur  (with  certain  exceptions)  at  ten  per  cmtJ  of  ibe  assessed 
valuation  of  real  property  subject  to  taxation. 

The  Fixing  of  the  Tax  Rate 

The  Commissioners  of  Taxes  and  Assessnrat  are  required  to 
complete  thdr  valuations  by  October  1.  From  this  date  until 
February  1  they  are  engaged  in  preparing  tentative  tax  rolls 
and  in  considering  taxpayers'  protests.^  The  tax  roils  are  trans- 
mitted to  the  Board  of  Aldermen  and  pubMied  in  the  COy 
Record  about  March  1.  The  Board  of  Aldermen  is  required  to 
meet  on  the  first  Monday  in  March  to  fix  the  tax  rate.*  For 
this  purpose  a  report  is  prepared  for  the  Finance  Committee  of 
the  Board  of  Aldermen  by  the  Bureau  of  Accountancy  of  the 
Fmance  Department.  This  report  assembles  the  following  items 
(1927  figures  are  used): 

1.  Total  Budobt 

For  State  Tax   $12,622,697.53 

For  principal  and  interest  on  city's  long 

term  debt   97,756,554.71 

For  all  other  city  and  county  purposes  .  364,514,047.76 

^^^^^   474,893,300.00 

» Article  VIII,  Sectioii  10. 
belo™'  m      •  ~iii6irhrt  dabomte  caleulatioii  and  is  explaiiied  moie  fuUy 
'  See  below,  p.  172.  4  Charter,  Seetion  W. 


26  New  Yobk  Citt^s  Finances  and 


2.  The  Couptbomje&'b  EsmiATB  aw  ram 

General  Fund  ^     .    ...    .    .  80,910,238.51 

3.  Subtracting  this  from  the  previous  total 

leaves  amount  required  to  be  raised  by  taxes  393,983,061.49 

4.  The  assessed  valuation  of  property  liable  to 

taxaticm  for  city  and  oofiinty  purposeB 

and  State  Tax «   14,837,821,953.00 

5.  To  this  must  be  added  the  general  city  and 

borough  assessments^  collected  with  the 

property  tax,  amounting  to    ...    .  8,040|752.66 

6.  The  necessary  tax  rates  are  obtained  by  di- 

viding the  assessed  valuations  of  prop- 
erty into  the  amounts  required  with  the 
following  result:^ 


Nsw  YoBK  Cmr  Tax  Rates— 1027 


Fob  Yumm  1027 


Borough  of  Manhattan: 

(County  of  New  York) 
Borough  of  the  Bronx: 

(County  of  Bronx) 
Borough  of  Brookljm : 

(County  of  Kings) 
Borough  of  Queens: 

(County  of  Queens) 
Borough  of  Richmond: 

(Oo^ty  of  Richmond) 


Tax  Ratb 

ON 

Pbbsonai. 
Ebtazb 


0266 

0266 
0266 


Tax  Rate 
ON  Ebtatb 

Non- 
Exempt 


0266 


0266 


AaSKSSMBNT 

Ratbs  worn 

Local 
Imfbovk- 


.0004 
.0001 

.0007 
.0007 


Total.  Rates 

ON  BMAMt 

EsTAra 

NOM^ 


.0270 


.0270 


.0273 


.0273 


Tax  and 
AasxasMBNT 

Ratm  on 
Rbai.  Estate 
raoM  Local 

Taxation 


.0013 


.0013 


.0016 


.0016 
.0012 


*  This  General  Fund  for  the  reduction  of  taxation  represents  the  aggr^ate  of  all 
miscellaneous  revenues  of  the  city  not  specifically  pledged  and  therefore  is  deduct- 
ible from  the  amount  required  to  be  raised  by  the  property  tax. 

*  There  is  also  property  (new  dwellings)  exempt  from  local  taxation  but  subject 
to  State  Tax  and  Assessments.  This  is  valued  at  $916,512,915.  See  below,  p.  149. 

» Explained  below,  p.  181.  The  different  boroughs  have  their  own  assessable 
projects  so  that  the  tax  rate  differs  from  borough  to  borough. 

*  The  tax  rates  are  expressed  in  terms  of  cents  on  each  dollar  of  valuation  and 
ftre  rounded  upward  to  the  nearest  hundredth,  Charter,  Secticm  900. 


Financial  Adminisibation:  Fiscal  Structubb  27 

The  tax  rate  on-  real  and  personal  property  is  calculated  as 
described  in  order  to  balance  the  budget.  An  absolute  balance 
is  secured  only  if  all  the  taxes  are  collected,  and  this  in  piactice 
is  unattainable.  Hence,  tax  dtf  eienc^  appropriations  are  made 
in  the  budget  to  cover  the  estimated  uncollected  margin.  * 

Temporary  Borrowings 

In  addition  to  the  expenditures  provided  for  by  the  tax  budget, 
the  city  cares  for  certain  needs  from  the  proceeds  of  temporary 
borrowings.  Strictly  speaking,  there  are  four  forms  of  temporary 
borrowings.  Two  are  in  anticipation  of  taxes  or  of  long-term  bor- 
rowings.   Two  are  supplementary  appropriations. 

Taxes  are  not  paid  untU  May,  but  in  January  the  city  needs 
money  to  care  for  expenditures  that  have  been  authorized. 
Revenue  Bills  ^  are  issued  in  anticipation  of  the  collection  of 
taxes.  They  run  for  sixty  to  ninety  days  and  bear  interest 
ranging  from  3J^  to  4J^%  depending  upon  the  money  market. 
In  1926  the  city  issued  Eev^ue  Bills  to  the  amount  of 
S243,350,000.  The  interest  on  this  sum  amounted  to  approxi- 
mately $3,000,000.  A  substantial  portion  of  this  charge  could, 
of  course,  be  eliminated  if  taxes  were  due  at  the  time  the  city 
began  to  spend  the  money.  Offsetting  this  saving,  howev^, 
would  be  the  inconveni^ce  to  the  taxpayer  by  reason  of  earlier 
payments.  Too  sharp  an  advance  of  the  dates  might  give  the 
city  surplus  funds  which  it  would  have  to  keep  on  deposit  until 
needed  for  current  expenditures.^  Corporate  Stock  Notes— the 
other  form  of  anticipatory,  temporary  borrowing — are  merely  a 
conv^ent  and  economical  method  of  furnishing  money  for  proj- 
ects to  be  financed  from  long-term  bonds  pending  the  issuance  of 
the  bonds  themselves.*  The  remaining  two  forms  of  temporary 
borrowings  are  of  some  budgetary  importance. 

*  See  below,  p.  57. 

« J!^"*®''  Section  187.  The  Charter  permits  the  interchangeable  designations  of 
revenue  bonds"  and  ''revenue  bUls."  The  city  now  issues  only  the  latter.  The 
Camrter  also  provides  (Section  186)  for  another  type  of  revenue  bonds  to  be  issued 
to  meet  the  city's  paym^t  of  its  share  of  the  state  tax  and  to  pay  certain  chami 
against  state  school  moneys. 

'  The  tax  dates  were  advanced  to  their  present  positions  in  1916. 

*  See  below,  p.  187. 


28  New  Yobk  City's  Financss  and 

Special  Revenue  Bonds  are  issued  to  provide  for  what  are 
essentially  supplementary  appropriations.^  Hie  Charter  re- 
quires that  such  temporary  obligations  must  be  redeemed  out  of 
tJie  tax  levy  of  the  next  succeeding  year  and  that  the  necessary 
Impropriations  must  be  made  in  the.  budget.  Special  Revenue 
Bonds  may  be  issued: 

1.  To  pay  the  cost  of  condemning  unsafe  buildings. 

2.  To  pay  charges  audited  by  the  Board  of  Estimate.^ 

3.  To  pay  judgments  recovered  against  the  city. 

4.  To  provide  for  the  prevention  of  contagious  diseases.' 
6.  To  defray  the  cost  of  instalhng  water  meters.* 

6.  To  meet  deficiencies  in  the  Street  and  Park  Openings  Fund.' 

7.  To  pay  lawful  claims. 

8.  F(Nr  general  purposes  up  to  $2,000,000;  this  requires  the 

consent  of  three-fourths  of  tiie  membmt  of  t^e  Board 
of  Aldermen. 

0.  To  meet  certain  emergency  appn^iiations  for  the  Health 

DepsTtmmi.* 
10.  To  replenish  the  Fire  Department  Relief  Fund. 

Section  546  of  the  charter  permits  Special  Revenue  Bonds  to  be 
issued  for  snow  removal  purposes.^  They  are  also  issued  to  meet 
certain  mandatory  expenditures,  e.g.,  for  voting  machines  as 
required  by  the  Election  Law  and  for  the  expenses  of  the  Transit 
Commission  and  Armory  Board. 

The  most  recent  form  of  temporary  indebtedness  is  Tax 
Notes  which  originated  with  the  Pay-as-you-go  Law  in  1916.* 
It  is  a  question  whether  the  intention  was  to  establish  them  as  a 
permanent  form  of  temporary  borrowing.  Tax  Notes  resemble 
Special  Revenue  Bonds  in  that  they  must  be  redeemed  in  the 
budget  of  the  next  succeeding  year.  They  may  be  issued  for  any 
capital  project  which  commends  itself  to  the  Board  of  Estimate.* 

1  Charter,  Sections  187,  188. 

*  These  relate  to  cost  to  public  officer  in  defending  himflelf  in  a  trial  involving  his 
title  to  office.    Charter,  Section  231. 

*  Charter,  Section  236,  limited  to  |80,00a 

*  Caiarter,  Section  475. 

*  CSiaiter,  Section  174. 

*  Caiarter,  SecticMis  1177  and  1178. 
»  See  p.  185. 

>  Charter,  Section  169.   See  discussion  in  Chapter  YII,  pp.  209-214. 
»  See  below,  p.  70. 


Financial  Administration:  Fiscal  Structure  29 

It  should  be  borne  in  mind  in  connection  with  all  of  these 
forms  of  borrowing,  that  otUhorizaMan  is  not  followed  immediately 
by  the  b<MTOwing  of  the  money.  The  actual  incurring  of  the 
obUgation  does  not  take  place  until  cash  is  actually  required  to 
meet  bills  that  have  been  presented.  The  Comptroller  is  per- 
mitted a  good  deal  of  discretion  in  tiie  use  of  any  cash  he  may 
happen  to  have  in  the  city  treasury,  and  may,  therefore, 
rfFect  savings  by  reducmg  idle  bank  balances  at  low  interest 
rates. 

It  should  be  noted,  however,  that  authorizations  to  the  de- 
partments once  made  are  good,  unless  rescmded,  until  used. 
Occasionally  several  years  may  elapse  between  the  authoriza- 
tion and  the  issuance  of  the  obligations.  The  Board  of  Estimate, 
therefore,  frequently  has  before  it  only  a  fragmentary  picture  of 
the  mon^  which  may  have  aheady  be^  authorized  for  a 
particular  department. 

Long-Term  Bobbowings 

The  procedure  which  the  city  of  New  York  follows  when  it 
borrows  money  for  long  improvemmts  will  be  described  m  some 
detail.^  Capital  expenditures  are  not  at  the  present  tune  planned 
for  in  any  comprehensive  manner.  Various  projects  are  author- 
ized from  time  to  time  during  the  year  and  the  Tax  Budget  is 
adopted  m  November  with  no  indication  of  the  outiays  which 
the  city  will  make  from  the  proceeds  of  the  sales  of  its  bonds. 
This  is  a  matter  of  great  importance  in  connection  with  proper 
budgetary  procedure,  long-term  financial  planmng,  and  the  edu- 
cation of  citizens  in  the  purposes  of  municipal  expenditures. 

The  nomenclature  used  for  New  York's  long-term  indebtedness 
sometimes  causes  confusion.  The  Corporate  Stock  of  the  city 
is  nothing  more  nor  less  than  the  ordinary  garden  variety  of  long- 
term  bonds.  Throughout  the  succeeding  chapters,  therefore, 
bonds  will  be  used  as  includmg  Corporate  Stock,  and  (this  is 
the  city's  custcm)  the  phrase  Corporate  Stock  wiU  be  used 
to  refer  to  all  of  the  city's  long-term  obhgations.  Strictly 

^  See  bebw,  p.  187. 


30 


Nbw  York  City's  Financbs  and 


speaking,  however,  there  are  three  categories  of  long-term  bor- 
rowings: 

1.  Assessment  Bonds  ^  are  used  to  r^lenish  the  Street  Ln- 
provenetit  Fund  and  the  Street  and  Park  Opening  Fund  which 
defray  the  cost  of  paving,  sewers,  and  similar  improvements 
ultimately  to  be  paid  for  by  special  assessments  upon  the  bene- 
fited property.2  Of  the  $60,000,000  of  Assessment  Bonds  out- 
standing, $53,800,000  are  held  by  the  city's  sinking  funds.* 

2.  Serial  Bonds  were  authorised  as  a  substitute  for  Corporate 
Stock  by  a  charter  amendment  of  lOlS.-*  The  difference  be- 
tween the  two  forms  of  indebtedness  is  to  be  foimd  in  the  mode 
of  redemption.  A  definite  and  usually  equal  number  of  an  issue 
<rf  Serial  Bonds  mature  and  are  retired  each  year.  The  terms  of 
these  bonds  were  at  first  noticeably  shorter  than  the  terms  of 
Corporate  Stock,  but  the  recent  tendency  has  been  to  lengthen 
them.  Skty  per  cent,  of  the  outstanding  Serial  Bonds  have 
forty-year  maturities.*  The  city  clings  rather  closely  to  Corpo- 
rate  Stock.  Less  than  one-fourth  of  the  debt  incurred  since 
1915  is  in  Serial  Bonds.* 

3.  Corporate  Stock  requires  sinking  funds  in  which  will  be 
accumulated  sufficient  mon^  to  pay  o&  the  principal  at  the  date 
ol  maturity.  The  best  system,  followed  for  the  most  part  by 
New  York  City,  provides  for  the  annual  payment  into  the  sink- 
ing fund  of  an  amoimt  known  as  an  amortization  charge.  This 
is  actuarially  calculated  to  accumulate  with  interest  a  sum  which, 
"wbm  the  bonds  mature,  will  equal  their  principal. 

Apart  from  various  special  purposes,  such  as  refunding,^ 
assessment  deficiencies,^  and  damages  and  awards.  Serial  Bonds 
or  Corporate  Stock  may  be  issued  upon  authorization  by  the 
Board  of  Aldermen  with  the  ^proval  of  the  Board  of  Estimate 
mly  for  revenue-producing  improvements— that  is,  projects 

» Charter,  Section  181. 

•  See  below,  p.  183. 

»  Comptroller's  Report  for  1926,  p.  357. 

*  Sectbn  169,  as  amended  by  the  Laws  of  1915,  c.  309. 
•See'rafale(nip.219. 

•Seep.  197. 

^  Charter,  Sections  170,  235. 
•Charter,  Sections  134,  173,  422. 


Financial  Administration:  Fiscal  Structukb 


31 


haymg  "a  substantial  present  or  prospective  earning  power." » 
This  reqmrement— commonly  referred  to  as  the  Pay-as-you-go 
Law— does  not  extend  to  schools  and  a  limited  number  of  special 
purposes.  In  practice  the  charter  provision  has  been  weakened 
by  a  hberal  interpretation  of  ''revenue  producing/' 

New  York  City  at  present  borrows  annually  more  than 
$100,000,000  through  long-term  obligations.  There  is  thus  a 
very  substantial  addition  to  the  annual  income  and  expenditures 
of  the  city,  and  an  annual  increase  of  the  r^ular  debt  service 
charges.  Table  III  indicates  the  receipts  and  (in  summary 
fashion)  the  expenditures  from  long  term  borrowings  durinir 
1925  and  1926. 


TABLE  in 

Nbw  Yobk  City's  Bobbowinos  and  Expenditures  from  BoRRowmos 

1925  AND  1926 


1925 

1926 

BoBBowmos: 
Unexpmded  Balance,  Jamiary  Isb  . 
Corporate  Stock,  Coipomte  Stoek  Notes, 

and  Serial  Bonds    .  . 
Ouh  Refunds  and  Journal  Adjustments  . 

$2,951,064 

106,033,000 
303,589 

$2,253,885 

116,937,925 
244,086 

$109,287,653 

$119,435,896 

SZPBNDITUBBS : 

Water  

Docks  

Schools  

Various  Purposes  ... 
Replenishment  of  Assessment  Funds    .  . 
Refunding  of  Assessment  B<mds    .    .  . 
Journal  Transfers .    .  . 
UnexpmM  Makmee,  December  Slat   .  . 

119,487,233 
9,390,087 

6,808,106 
43,875,456 
23,335,827 

3,979,728 

157,331 
2,253,885 

$51,948,486 
7,925,868 
2,032,765 

17,969,900 
14,258,222 
12,000,000 

8,000,000 
753,266 

4,547,389 

$109^287,653 

$119,43^896 

» CSiarter,  Section  169,  as  amended  1916. 


32 


New  Yobk  City's  Financss  and 


The  total  amount  of  Corporate  Stock  authoiiied  during  the 
3rear  was  $110,465,000.   lliis  would  not,  of  course,  correspond 

to  the  actual  issues  during  the  year  because,  as  has  already  been 
explained,  the  issuance  is  not  made  imtil  payments  are  actually 
necessary.  Authorizations  are  good  until  used  or  rescinded.  On 
January  1, 1^,  for  escample,  there  was  outstanding  $183,426,000 
in  authorizations  against  which  no  vouchers  had  been  drawn. 
The  net  vouchers  registered  during  1925  aggregated  $96,141,000. 
There  was  a  balance  of  $156,554,000  of  unused  authorizations  to 
be  carried  over  at  the  opening  of  the  year  ld27.^  This  means 
that  no  biU  had  been  pres^ted  in  connection  with  these  authori- 
zations.   In  most  cases,  the  work  was  already  in  progress. 

New  York  City's  debt  structure,  built  of  the  materials  which 
have  been  discussed,  now  reaches  staggering  proportions.  On 
January  1,  1927,  the  gross  funded  debt  (omitting  General  Fund 
Bonds)  was  $1,760,993,786.  The  structure  is  compKcated  by 
niunerous  constitutional  limitations  and  judicial  decisions  inter- 
preting them.  The  chief  complexities  wiU  be  discussed  in  detail 
later.  The  structure  is  supported —  so  far  as  the  nonnaenal  bonds 
are  concerned —  by  six  sinking  funds. 

Enough  hias  already  been  said  to  show  that  the  financial  ad- 
ministration and  finances  of  New  York  City  are  not  noteworthy 
for  their  simplicity.  The  main  features  of  the  financial  adminis- 
tratkm  have  been  listed.  Their  discussion  has  ignored  other 
features  of  the  governmental  sysbem  which  are  not  important 
from  a  fiscal  standpoint.  The  government  of  the  city  as  a  whole 
is  intricate.  There  are  one  himdred  and  sixty-five  separate  and 
independent  boards,  bureaus,  and  commissions  which  submit 
Imdget  estimates  to  the  Board  of  Estimate  and  Apportionment. 
The  Mayor  has  a  tolerably  effective  control  over  the  strictly 
mimicipal  functions  of  the  city's  government.  Most  adminis- 
trative activities  have  been  brought  within  sixteen  departments 
whose  heads  the  Mayor  appoints.   Tb»  only  strictly  adminis- 

*  These  figures  are  from  the  Comptroller's  Report  for  1926,  p.  183.  There  are 
certain  cash  refunds  of  $150,386  and  journal  transfers  of  $20,555,048  to  the  assess- 
ment fund  which  compUcate  the  transaction  but  are  too  technical  to  be  discussed 
hen. 


Financial  AmfDnsm^TiOK:  Fisgal  Stbuctubb  33 

trative  function  entrusted  to  a  board  is  that  of  subway  buHding 
which  is  m  the  hands  of  the  Board  of  Transportation.  A  few 
quasi-legislative  or  quasi-judicial  functions  em  vested  in  such 
bodies  as  the  Board  of  Taxes  and  Assessment,  the  Board  of 
^'l^^'^'  the  Board  of  Standards  and  Appeals,  and  the  Civil 
Service  Commission,  which  are  not  subject  to  unitary  control 

There  are,  however,  two  groups  of  governmental  units  <nw 
which  the  Mayor  has  no  direct  authority.  Five  county  govem- 
mmis  each  with  its  sheriff,  r^^ist^  of  land  titles,  county  clerk, 
and  surrogate,  aU  independently  elected,  are  supported  from  the 
municipal  treasury  but  are  not  subject  to  municipal  supervision. 
The  appropriations  of  these  county  governments  aie  to  a  con- 
siderable extent  covered  by  mandatory  state  laws.  Each  of  the 
five  counties  is  abo  a  borough  with  its  borough  president  who  is 
popularly  elected.  The  Borough  President  has  charge  of  high- 
ways, sewers,  pubhc  buildings,  and  private  building  construction, 
and,  in  the  case  of  Queens  and  Richmond,  of  garbage  and  refuse 
dispose  The  Borough  Premdents  not  only  are  not  subject  to 
control  by  the  Mayor,  but  are  also  members  of  the  Board  of 
Estimate  which  votes  appropriations.  The  taxpayer  expects  the 
Borough  President  to  obtain  money  for  his  borough  and  at  the 
same  time  demands  that  the  Mayor  keep  Oie  tax  rate  down. 
This  mattw  is  dealt  with  later. 

In  comparison  with  that  of  the  city  of  New  York,  the  fiscal 
structure  of  the  national  government  is  simplicity  itself.  The 
message  of  the  President  transmitting  to  Congress  the  Budget 
for  the  service  of  a  fiscal  year  and  the  accompanying  budget 
statfflnents  give  the  citizen  a  fairly  intelligible  idea  of  where  the 
national  government  gets  its  money  and  of  how  that  money  is 
spent.  The  citizen  of  New  Ywk  is  not  so  fortunate,  because  of 
l^e  complexities  which  have  aheady  been  hinted  at,  and  because 
the  financial  reports  of  the  city  do  not  enable  him  who  reads  to 
learn. 

The  most  elaborate  and  complete  report  of  any  divifflon  of  the 
city  government  is  the  dmpfroB^s  Report— a  bulky  volume  of 
ahnost  four  hundred  foHo  pages.  The  Charter  requires  such  a 
document  to  be  published  in  the  City  Record  within  two  months 


34  New  York  City^s  Finances  and 


ol  the  close  of  the  calendar  year  and  in  a  general  way  prescribes 
its  contmts.^ 

The  arrangement  of  the  report  has  been  more  or  less  standard- 
ized within  the  last  ten  years  except  as  to  the  numbers  or  letters 
given  to  the  various  accounts  and  statements.  The  volume  is 
remarkable  for  the  fullness  of  the  information  it  contains  and  the 
complete  accuracy  and  precision  with  which  it  is  compiled  and 
published  within  sixty  days  of  the  close  of  the  year  with  which  it 
deals.  The  following  abridged  table  gives  some  idea  of  its  contents: 

A  summary  of  all  cash  receipts  and  payments. 
A  table  of  actual  receipts  and  payments  omitting  inter  se 
transactions. 

Detailed  statements  of  city  treasury  receipts  by  funds. 

Further  statements  of  miscellaneous  receipts. 

Statements  ''A''  to  ''H/'  appropriation  accounts  for  the 
budgets  of  1918  through  1926  and  separate  statements  for 
the  D^artment  of  Education. 

Summary  of  voucher  and  warrant  actions  on  all  active  ap- 
propriation accounts. 

Statements  *^M,"  ^^Q,"  ^^R,"  etc., 

showing  the  operations  of  the  General  Fund,  Special  Revenue 
Bond,  TaxNotes,  Corporate  Stock,  Special  and  Trust  Accounts. 

Stat^ents  "U,"  "U-a,"  "V,"  giving  the  receiptSy  investments, 
and  payments  of  the  sinking  funds. 

Schedule  ''A,"  the  city's  bank  balances. 

Schedule  ''B,"  borrowings  during  the  year. 

Schedule  "C,"  complete  particulars  d  all  outstanding  indebt- 
edness. 

Statements  "W,"  "X,"  etc.,  outstanding  taxes,  special  funds, 

pension  fimds,  etc. 
Statement DL setting  forth  the  constitutional  debt  incurring 

power  on  the  first  of  the  year.^ 

'The  Charter,  Section  161,  requires  the  Comptroller  to  publish  "within  two 
months  after  the  close  of  the  calendar  year  a  full  and  detailed  statement  of  the 
receipts  and  expenditures  of  the  corporation  during  the  year  ended  December  31, 
together  with  the  'cash  balance'  in  the  city  treasury  and  in  the  Sinking  Funds"; 
also  "the  d^erent  sources  of  city  revenue  wad  the  amount  received  from  eaeh,  the 
aefend  appropriations  made,  the  objects  for  which  they  were  made,  and  the  amount 
ol  moneys  expended  under  each,  the  money  borrowed  on  the  credit  of  the  corpora- 
ti<m,  the  authority  under  which  each  loan  was  made,  and  the  tenna  on  which  the 
same  was  obtained  clearly  and  particularly  specified." 

*  A  further  statement  is  made,  usually  in  April,  after  the  new  assessments  are 
available,  giving  much  valuable  information  about  the  city's  debt. 


Financial  Administration:  Fiscal  Stbuctubb  36 

ExceUent  as  the  Comptroller's  Report  is,  it  is  neverthdess 
open  to  two  criticisms.   In  the  first  place  it  fails  to  present  a 
composite  summary  of  expenditures  either  by  departments  or  by 
governmental  functions.    To  get  a  clear  conception  of  all  the 
money  a  department  may  have  expended  in  the  year,  one  would 
have  to  search  through  nine  appropriation  accounts  and  Special 
Revalue  Bond,  Tax  Note,  Corporate  Stock,  and  special  fund 
accounts.   Secondly,  except  for  a  page  relating  to  comparative 
budget  totals  and  tax  rates,  the  whole  volume  deals  delusively 
witii  the  year  for  which  it  is  issued  and  attmpts  no  comparison 
with  previous  years.    Indeed,  in  some  instances  cash  balances 
and  unexpended  balances  are  not  carried  from  year  to  year  and 
one  must  refer  to  previous  volumes  for  cunmt  operations.  The 
whole  volume  is  in  strict  accordance  with  the  charter  require- 
mmts,  but  the  city's  finances  are  not  made  understandable  by 
the  public.   Intricate  the  city's  finances  are  and  intricate  they 
are  hkely  long  to  remain,  but  it  is  perfectly  posrible  to  present 
in  a  few  pages  a  summary  stat^ent  or  two  which  will  indicate 
the  city's  financial  position  and  compare  it  with  previous  years. 

Until  1922  this  need  was  partly  suppHed  by  the  Financial 
Summary,  an  excellent  and  thorough  compilation  presenting  all 
the  information  that  most  inquiring  citizens  might  want.  The 
principal  difficulty  with  that  publication  was  its  size  and  the 
delay  in  its  appearance.  Its  size  rendered  it  almost  prohibitively 
expensive  and  appallingly  duU,  while  the  two  years'  delay  in 
preparing  it  seriously  diminished  its  us^uhiess.  It  fdl  finally  of 
its  own  weight.  Two  things  are  to  be  learned  from  its  failure. 
To  be  of  genuine  service  a  statement  must  be  brief  and  readable, 
and  it  must  appear  about  the  time  the  budget  is  being  considered! 

On  August  15,  1927,  ComptroUer  Berry  issued  some  tables 
which  attempted  for  the  first  time  to  show  in  sunple  form  the 
financial  podtion  of  the  city.  He  announced  that  the  publica- 
tion of  such  tables  would  be  a  permanent  feature  of  the  work 
of  the  Finance  Department.  "I  feel  certain,"  said  Ck)mptroUer 
Berry,  ''that  this  statement  showing  how  and  where  the  city 
obtains  the  mone3^  for  its  support  and  the  manner  in  which  it  is 
expended  will  be  read  with  interest  by  thousands  of  our 


36 


Nitw  YoBx  Cut's  Finangbs 


citizens  who  have  had  no  way  of  informing  themselves  on  tHia 
subject.  .  .  . 

''The  majority  of  our  citizens  are  not  to  blame  if  th^  appear 
to  be  insufficiently  familiar  with  the  dty's  transactions, 
because  information  of  this  character  has  not  been  available  in 
a  form  they  can  imderstand.  The  annual  report  of  the  Depart- 
ment of  Finance,  giving  this  information  in  a  detail  that  requires 
more  than  three  hundred  extranaized  pages,  is  a  formidable  docu- 
iMEit  that  ev«tt  the  city  officials  are  reluctant  to  analyze."  ^ 

BWTSons  not  in  the  city^s  service  are  no  less  reluctant,  but  some 
analysis  is  nevertheless  ventured  in  the  following  pages. 

^Ntw  York  Times,  August  15,  1927. 


CHAPTER  II 

THE  PLANNING  OF  NEW  YORK  CITY'S 

EXPENDITURES 

The  form,  content,  method  of  preparation,  and  procedure  of 
adoption  of  a  municipal  budget  are  matters  of  great  importance. 
With  the  great  growth  in  size  and  complexity  of  governmental 
establishments,  the  principal  key  to  an  adequate  understanding  of 
municipal  activities  is  found  in  the  budget  docmnents.  The 
surest  aid  to  popular  control  of  municipal  officials  is  a  proper 
budgetary  machinery.  The  budget  should  Ust  the  multifarious 
activities  of  government  so  that  their  significance,  extent,  rela- 
tionships, and  cost  may  be  understood.  As  in  private  corpora- 
tions, proper  budgetary  methods  are  a  great  force  for  efficimc^ 
and  economy.  The  inauguration  of  budget  fifystems  by  the 
federal,  state,  and  municipal  goverommts  has  marked  the  aban- 
donment of  the  happy-go-lucky  way  m  which  pubhc  finance  was 
formerly  handled. 

Twenty  years  ago  New  York  City  took  the  initial  step  toward 
the  establishment  of  the  first  municipal  budget  system  m  the 
United  States.  By  1913,  however,  the  budget  system  of  the  city 
had  practically  reached  its  present  form.  This  placed  the  city  in 
a  leading  position  at  that  tune.  Smce  1913,  however,  New 
York's  leadership  in  modem  budgetary  methods  has  be^  ahnost 
whoUy  lost.  Since  1917  thm  have  be^  modifications  of  detail, 
but  no  extensive  improvements. 

Meanwhile,  however,  improvements  in  the  financial  machinery 
and  reports  of  other  municipaUties,  and  the  experience  of  the 
federal  and  various  state  govemmwits  have  suggested  certain 
elementary  essentials  which  should  be  found  in  any  municipal 
budget  system. 

37 


38 


New  York  City's  Finances  and 


Four  such  essentials  may  be  listed : 

(1)  The  chief  executive  should  be  directly  responsible  for  the 
preparation  of  a  budg^  on  the  basis  of  estimates  made  by  the 
operating  departments.  After  the  budget  is  approved  by  the 
legislative  body,  the  executive  should  have  broad  powers  to 
supervise  the  manner  in  which  it  is  carried  out. 

(2)  A  proper  budget  ^stem  must  furnish  a  complete  state- 
ment of  all  income  and  expenditures. 

(3)  The  budget  should  contain  informational  data  in  the  form 
of  charts,  graphs,  tables,  etc.,  as  explained  below.  ^  There  must 
also  be  an  appropriation  ordinance  —  sufficiently  detailed  to 
make  it  certain  that  the  intent  of  the  appropriating  authorities 
will  be  carried  out,  and  sufficiently  flexible  to  leave  officials  free 
to  secure  administrative  efficiency  and  economy. 

(4)  A  pubhc  budget  must  not  deal  solely  with  the  receipts 
and  expenditures  of  a  single  fiscal  year.  A  budget  should  indicate 
those  items  which  will  require  capital  expenditures  in  the  future, 
and  if  possible,  the  budget-making  authorities  shotdd  consider  their 
capital  programme  when  they  prepare  and  adopt  the  annual 
appropriation  budget.' 

L  Responsibility  fob  the  Budget 

An  essential  of  an  efficient  budget  system  is  the  responsibility 

of  the  chief  executive  for  the  preparation  of  the  estimates.  To 
locate  the  responsibiUty  for  New  York  City's  budget  plan  it  will 
be  neoessary  to  describe  in  further  detail  the  worldngB  of  the 
city's  financial  machinery. 

Preparation  of  Budget  Estimates 

Early  in  the  spring,  the  Board  of  Estimate  and  Apportionment 
directs  the  departmmt  heads  to  prepare  their  estimates  for  the 
next  year  and  to  have  th^  available  for  return  to  the  Board  by 

»Seep.  66. 

*  Two  other  essentials  are  usually  considered  parts  of  an  efficient  b^idget  system: 
(i)  an  efficient  accounting  machinery  to  prevent  expenditures  that  are  not  in  accord- 
ance with  the  law  and  (ii)  financial  reports  of  such  a  character  as  to  permit  citizens  to 
obtain  witbin  the  compass  of  a  single  document,  a  conspectu?  of  the  city's  fin»n(})al 


Financial  Administration;  Expenditubes  39 


July  10.  This  is  done  by  a  resolution  of  the  Board  (see  Calendar 
No.  a41,  Board  of  Estimate,  March  25,  1926).  Some  time  later, 
the  resolution  of  the  Board  is  conmiunicated  to  the  department 
heads  by  the  Secretary  of  the  Board  in  a  letter  containing  instruo- 


CHART  I 

Procedure  of  Adoptioii  gp  Biaddet  in  New^^orK  City 


Hie  Board  of  Estimate  6-^  Apportionment 


OowiPittCec ' 

of  the  Whole 

of 

Board  of  Estimate 


of 

Budget  Director 
]>«partmeut  Head 


Staff  of 


Secretary 

Board  op 
Eftimate- 


Director 
of  the 

Budget 


Sstimates 

prepared  Ijy  165  (9 
Departments,  Boards 
Bureaus,  Etc. 


Ventalwe Budget 

Before  October  lott 


October  HOtfr 


Board  of  i  idermexi^ 


rinancc  Committee 


1 


C    Hearing  ) 


(   Adopfion  A 

\>ePore  November  25th/ 


Approval  oP  I 

The  Mayor.  ( 


T 


Cartificatlon  before 
December  XStil 
JkhAUyer.Comptraler  IrCi^ 


40 


Nsw  YoBK  Crrr's  Finances  and 


tions.  These  instructions  are  quite  simple  and  brief,  because 
there  are  few  changes  in  procedure  from  year  to  year. 

A  pamphlet  ciJled  ''Budget  Classification"  was  prepaied 
about  twrive  years  ago  and  has  been  reprinted  from  time  to 
time  with  minor  changes.  The  latest  issue  is  that  of  1919. 
This  pamphlet  instructs  the  department  heads  on  the  meaning 
of  the  various  classifications  and  gives  some  illustrations  of  what 
may  or  may  not  be  included  under  each.  Where  a  department 
head  is  in  doubt  concerning  the  proper  classification,  a  ruling  may 
be  secured  by  application  to  the  Secretary  of  the  Board  of  Esti- 
mate and  Apportionment. 

A  sample  set  of  forms  accompanies  the  letter  of  the  Secretary 
of  the  Board.  The  niunber  of  separate  forms  has  been  much 
reduced  during  the  last  ten  years.  The  following  forms  were 
med  far  the  1927  budget: 

A.  Personal  service; 

B.  Food  suppUes; 

Supplemental,  —  Food  supplies  in  detail; 

C.  Supplies,  23  classes; 

D.  Wearing  apparel; 

E.  Contractual  services,  etc.,  14  classes; 

F.  General  r^airs  and  replacements; 

G.  T^ephone  service; 

if.  Summary  of  other  than  personal  service,  and  depart- 
mental summary. 

The  larger  departments  have  thdr  own  preliminary  estimate 
blanks,  which  their  bureaus  and  divisions  fill  out  and  discuss  at 
departmental  conferences.  The  Board  of  Education  has  the 
most  elaborate  departmental  procediu-e.  Since  education  re- 
ceives the  largest  single  appropriation  in  the  budget  (1107,000,000 
in  1927)  the  Board's  method  of  prepaiing  its  estimates  should  be 
described. 

Department  of  Education  Procedure 

In  March  or  April  the  directors  of  the  various  bureaus  and 

activities  in  the  Department  of  Education  are  required  to  fill  out 
and  return  complete  estimate  blanks  for  x)ersonnel  and  suppHes. 


Financial  Administration:  Expbnditubes  41 


The  department  uses  ei^^t  sets  of  blanks  in  the  preparation  of  its 
estimates  as  follows: 

Form  9.  Personal  service  —  supervisory  salaries; 

(Permanent  positions,  vacancies,  and  new  posi- 
tions  showing  period,  schedule,  rate,  and  amount.) 

Form  10.  Personal  service  —  teachers'  salaries ;  (same  items.) 

Form  11.  Personal  service  —  salaries;  (same  items.) 

Form  14.  Personal  service;  (positions  by  titles,  rates, 
amount.) 

Form  15.  Personal  service  —  salaries;  (position  or  subject, 
number  of  sessions,  rate  per  session,  amount.) 

Form  17.  Personal  service;  (location  of  classes,  number  of 
classes,  hours  per  day,  days  per  week,  number  of 
weeks,  aggregate  number  of  days,  rate  per  day, 
amounts  requested.) 

Form  21.  Supplies;  (item,  quantity,  number  of  pupils, 
number  of  classes,  cost  per  imit,  amount.) 

Form  41.  Classroom  equipment;  (item,  quantity,  number  of 
classes,  Aumber  of  pupils,  cost  per  unit.) 

These  tanm  contain  columns  for  the  allowances  for  the  currmt 
year  in  the  case  of  salaries,  and  in  the  case  of  supplies  the  allow- 
ances for  the  current  year,  quantity  used  during  the  previous  year, 
quantity  used  January  to  April  of  current  year,  and  quantity  in 
stock  May  1  of  the  current  year.  This  information  is  filled  in 
bef(m  the  blanks  are  sent  out  to  the  duwtors  of  the  various  activi- 
ties. Forms  10  and  40  also  contain  columns  for  the  distribution 
of  new  positions  or  new  equipment,  showing  the  school  number 
and  the  amount  requested.  The  blanks  are  furnished  by  and 
returned  to  the  finance  bureau  of  the  D^artment  of  Education 
and  the  figures  are  checked  by  this  bureau.  The  estimates  are 
then  examined  by  the  Superintendent  of  Schools  who  goes  over 
the  items  and  conducts  an  informal  hearing.  His  recommendar 
tions  are  entered  in  a  special  column  on  the  forms. 

The  Finance  Committee  of  the  Board  of  Education  consists  of 
five  members.  This  Committee  holds  sessions  ahnost  daily 
during  the  months  of  June  and  July.  Somethnes  these  sessions 
last  the  entire  day  or  through  the  evening.  The  directors  of  the 
differ^t  bureaus  and  activities  are  heard.  An  examiner  of  the 


42 


New  York  City's  Finances  and 


Board  of  Estimate  and  Apportionment  is  present  during  all 
these  hearings  and  participates  in  the  discussion.  At  the  con- 
clusion of  the  regular  sessions  an  executive  session  is  held.  The 
examiner  is  given  an  opportimity  to  reopen  the  discusraon  of 
any  decision  which  he  does  not  approve.  The  examiner's  report 
to  the  Director  of  the  Budget  and  the  committee  of  the  whole 
<tf  tiie  Board  of  Estimate  and  Apportionment  is  made  on  the 
basis  of  conclusions  he  reaches  during  these  sessions  and  through 
personal  investigations.    No  other  examination  is  made. 

Toward  the  close  of  the  sessions  of  the  Finance  Committee,  the 
other  three  members  of  the  Board,  of  Education  attend.  The 
finance  Committee  then  becomes  practically  a  committee  of  the 
whole.  The  estimates  are  then  recast  by  the  finance  bureau 
into  the  form  required  by  the  Board  of  Estimate  and  Apportion- 
ment and  the  Finance  Conmdttee  reports  them  out  to  the  Board 
of  Education  itself  after  a  series  of  executive  sessions.  The 
approval  by  the  Board  occasions  little  delay.  These  official  esti- 
mates are  printed  in  a  large  pamphlet  of  123  pages  called  the 
''Board  of  Education  Budget  Estimates."  This  is  sent  to  the 
Board  of  Estimate  and  Apportionment  and  is  thefeaf  ter  treated 
in  the  same  manner  as  the  other  departmental  estimatei^. 

ExamiruUion  of  Budget  Estimates 

The  Charter  provides  that  d^artment  estimates  shall  be 
submitted  to  the  Board  of  Estimate  on  or  before  August  1.  Most 

departments  return  their  estimates  within  the  required  time,  but 
there  have  been  instances  where  the  estimates  were  not  received 
in  time  for  inclusion  in  the  Tentative  Budget,  October  10.^  The 
Secretary  receives  innumerable  supplementary  estimates  in  the 
form  of  letters  asking  him  or  the  Board  to  amend  this  or  that 

»  The  estimates  of  the  Board  of  Education  are  very  carefully  prepared.  On  the 
whole,  the  Board,  in  its  eSort  to  estimate  e^q^endituies,  succeeds  better  than  the 
other  departments. 

*  The  departments  prepare  five  copies  of  their  estimates  which  are  distributed  as 
follows:  one  to  the  Mayor,  which  is  turned  over  to  the  Director  of  the  Budget;  one 
to  the  Comptroller;  one  to  the  Presideiit  of  the  Board,  of  Aldermen;  and  one  to  the 
Secretary  of  the  Board  of  Estimate  for  use  by  the  Examiners.  The  fifth  copy  is 
letained  by  the  department.  In  praetioe  all  work  from  the  printed  estimates  qn 
pnxtfs  as  soon  as  these  are  ready. 


Financial  Adminisisation:  Expenditures  4S 


item  or  list  of  items  in  the  estimates.^  These  suppl^entary 
estimates  or  requests  are  entirely  imknown  to  the  Charter.  Hiis 

situation  would  be  improved  if  the  Charter  were  amended  to 
provide  that  if  the  estimate  is  not  received  by  August  1,  the 
Secretary  be  forbidden  to  receive  it,  and  the  Board  prohibited 
from  increasing  the  previous  allowance.  The  Board  of  Estimate, 
or  the  Director  of  the  Budget,  if  his  powers  were  broadened, 
could  adopt  strict  rules  governing  the  submission  of  supplemen- 
tary estimates  and  the  Board  could  discourage  inexcusable  tardi- 
ness. Upon  their  transmission  to  the  Secretary  of  the  Board  of 
Estimate,  the  departmental  estimates  are  required  to  be  printed 
in  the  City  Record,  In  recent  years  this  publication  has  been 
delayed  until  late  in  September.  The  1927  estimates  were  pub- 
lished in  three  parts  in  the  City  Record  for  Septenb^  23  and  29, 
and  October  2,  1926.  These  estimates  should  be  available  to  the 
public  and  to  civic  organizations  in  sufficient  time  to  permit 
careful  examination.  Printing  should  take  place  not  later  than 
S^tember  1.  As  at  present  printed  the  estimates  aie  in  two 
columns  showing  the  budget  for  the  curr^t  year  and  the  requests 
for  the  succeeding  year.^ 

There  are  165  separate  departments,  boards,  and  officers  sub- 
mittmg  budget  estimates.  The  Secretary  of  the  Board  divides 
these  up  among  the  examiners.  The  assignments  are  prepared 
early  in  the  year  so  that  the  individual  examiners  may  know 
for  what  they  will  be  responsible  and  may  acquaint  themselves 
with  what  is  going  on  in  these  departments.  The  distributicm 
is  made  with  regard  to  function,  experience,  and  volume  of 
work.  Personal  service  is  separated  from  other  estimates  and 
assigned  to  individual  examiners  in  the  case  of  the  larger  depart- 
ments, namely,  police,  fire,  plant  and  structures,  health,  docks, 

*  Siq)plementary  estimates  are  not  printed  in  the  City  Record  as  is  required  by  the 
Qiarter  in  the  case  of  the  regular  departmental  requests.  If  the  supplementary 
estimates  had  to  be  published  before  they  could  be  considered  by  the  Board,  their 
number  would  be  greatly  reduced. 

2  The  "copy"  for  these  departmental  estimates  is  now  prepared  by  the  editor  of 
the  City  Record.  If  (until  such  time  as  this  system  is  superseded  by  an  executive 
budget)  the  examiners  of  the  Board  of  Estimate  did  this  work,  they  could  easily 
add  explanatoiy  and  statistical  data  that  would  make  the  estimates  much  more 
infonning,  particularly  in  respect  of  extensions  and  added  activities. 


44 


New  York  City^s  Finances  and 


water  supply,  Borough  Presidents  of  Manhattan  and  Brooklyn, 
parks,  and  one  or  two  oibmu  In  the  remaining  departments 
some  one  individual  examiner  is  responsible  for  the  review  of  the 
entire  departmental  request. 

So  far  as  circiunstances  permit,  the  examiners  are  reassigned 
to  the  same  duties  year  after  year.  In  this  way  they  acquire 
intimate  knowledge  of  the  operations  of  the  departments  and 
become  acquainted  with  their  officials.  Their  knowledge  of 
departmental  affairs  is  increased  by  their  being  engaged  the  year 
round  in  considering  budget  transfers,  and  appUcations  for  Tax 
Notes,  Corporate  Stock,  and  Special  Revenue  Bonds  from  the 
same  departments.  The  examiners  are  generally  in  touch  with 
the  departments  unofficially  before  the  estimates  are  actually 
prepared.  Except  in  the  case  of  the  Board  of  Education,  the 
examine,  however,  has  no  conspicuous  part  in  niAlring  up  the 
departmental  estimate.  The  departmental  estimates  are  per- 
manently preserved.  The  notes  and  data  gathered  by  the  ex- 
aminers are  kept  in  envelopes  according  to  departments  for  a 
yearortwo.^ 

At  present  the  examiners  work  under  the  joint  supervision  of 

ihe  Secretary  of  the  Board  of  Estimate  and  Apportionment 
appointed  by  it  and  the  Director  of  the  Budget  appointed  by 
the  Mayor.  The  Director  of  the  Budget  has  entire  charge  of 
their  activities  affecting  the  budget  and  budget  transfers. 
During  the  time  of  budget  making  the  examiners  become  prac- 
tically the  staff  of  the  Director  of  the  Budget.  At  other  times 
during  the  year,  they  have  their  own  responsibilities  in  con- 
nection with  the  work  of  the  Board  of  Estimate  and  Apportion- 
m!^t. 

A  careful  check  is  generally  made  of  all  the  figures  submitted 
in  the  budget  estimates.  An  examiner  also  visits  each  depart- 
ment to  discuss  the  estimates  in  detail.  This  procedure  tends  to 
become  stereotyped.  Attention  is  focused  largely  on  the  in- 
creases for  which  the  departments  make  out  their  cases.  The 

^Hiwre  may  be  room  here  for  improvement  by  creating  a  confidential,  well- 
eatalogued  file  of  budget  information  on  the  d^Murtments.  Each 
oomideimble  inf <niiiation  which  is  bogdy  his  own  pioperty. 


Financial  Administration:  Expenditubss  45 

thoroughness,  ingenuity,  and  penetration  of  the  examination 
depend  largely  upon  the  individual  examiners.  Very  little  of 
their  work,  however,  could  be  called  a  cost  data  examination. 
The  examiners  are  also  handicapped  by  a  lack  of  organization 
charts  of  the  departments. 

In  the  case  of  estimates  or  statements  prepared  by  the  Depart- 
mmt  of  Finance  with  regard  to  debt  service,  or  the  actuaries' 
estimates  for  the  various  pension  systems,  no  attempt  is  made  to 
examine  the  figures  except  to  prove  totals. 

When  the  examiner  has  complex  his  study  of  the  estimates  he 
confers  with  the  Director  of  the  Budget  who  summons  to  confer- 
ence the  department  head  concerned.  The  three  then  go  over 
the  estimates,  the  examiner  setting  forth  his  views,  the  depart- 
ment head  and  his  assistants  answering  them,  and  the  Budget 
Director  expressing  his  opmion.  At  the  conclusion  of  this  con- 
ference, the  estimates  are  printed  on  loose  sheets  with  a  column 
added  for  the  Director's  recommendations.  These  printed  esti- 
mate sheets,  including  the  Duector's  recommendations,  are 
forwarded  to  the  Committee  <rf  ike  Whole  of  the  Board  of  Esti- 
mate and  Apportionment. 

The  examiner  then  prepares  a  report  on  the  departmental 
estimates  and  the  Budget  Director's  recommendations,  which  is 
approved  by  the  Director  of  Investigations  and  transmitted  to 
the  Committee  of  the  Whole.  These  reports  vary  in  size  with  the 
size  of  the  department.  They  attempt  to  discuss  all  increases 
and  reasons  for  them;  but  in  few  cases,  if  any,  do  they  contain 
criticisms  of  the  amounts  asked  by  the  department  or  proposed 
by  the  Budget  Director. 

Consideration  and  AdopHan  of  the  Budget 

The  Committee  of  the  Whole,  consisting  of  the  entire  member- 
ship of  the  Board  of  Estimate  and  Apportionment,  with  the 
Mayor  presiding,  holds  hearings  upon  the  estimates  as  printed. 
The  members  of  the  Board  may  be  represented  by  a  deputy, 
but  avail  themselves  of  the  privilege  to  no  great  extent*  During 
this  budget  work,  a  calendar  is  prepared  of  matters  coming  b^ore 
each  session.  Matters  not  accepted  are  placed  in  a  special  budget 


46 


New  York  City's  Finances  and 


calendar  which  is  usually  taken  up  after  the  tentative  budget  is 
adopted.   The  proceeding3  are  relatively  brief. 

The  Board  of  Estimate  and  Apportioiiment,  ia  practioei  adopts 
the  budget  substantially  as  it  comes  from  the  committee.  Sec- 
tion 226  of  the  Charter  requires  that  a  ^'tentative  budget^'  be 
prepared  in  printed  form  on  or  before  October  10.  The  Board 
th^  has  tai  days  to  revise  this  budget  before  filing  it  with  its 
Secretary,  which  must  be  done  on  or  before  October  20.  When 
the  budget  is  filed,  it  is  known  as  the  "proposed  budget/'  This 
may  be  decreased,  but  may  not  be  increased  or  contain  any  new 
items.  In  1926,  the  Board  hdd  four  public  hearings  for  tax- 
payers on  the  "tentative"  and  "proposed*'  budgets.  These 
meetings  were  on  October  14,  at  2: 30  p.m.;  on  October  15,  at  11 
A.M.;  on  October  25  at  11  a.m.;  and  on  October  26,  at  11  a.m. 
In  all,  about  thirty  peamom  appeared.  Not  more  than  twoity 
departmental  requests  were  discussed.  In  actual  practice,  there- 
fore, little  but  newspaper  publicity  results  from  these  public 
conferences,  and  relatively  Uttle  of  that.  At  this  final  stage, 
most  of  the  criticisms  are  of  too  general  a  character  to  be  of  much 
value.  Those  groups  ci  individuals  who  are  particulaiiy  ior 
terested  and  alert  have  made  their  desires  known  in  the  depart- 
ments and  in  other  ways  long  before  this  time. 

The  Board  of  Estimate  and  Apportionment  is  required  to 
adopt  the  budget  on  or  before  October  SI.  In  practice  the 
budget  is  usually  adopted  on  the  last  day,  aometinies  after  stop- 
ping the  clock. 

The  Charter  requires  that  the  budget  be  submitted  to  the 
Board  of  Aldermen  within  five  days  after  its  adoption  by  the 
Board  of  Estimate  and  Apportionment,  and  that  the  Mayor  shall 
call  a  special  meeting  of  that  body  which  "shall  continue  from 
day  to  day  until  final  action  is  taken  thereon,  but  such  considera- 
tion shall  not  continue  beyond  twenty  days."  The  Board  is 
permitted  to  reduce  any  item  or  amount  in  the  budget,  subject  to 
veto  by  the  Mayor,  which  may  be  overridden  only  by  a  three- 
fourths  vote.  The  Board  of  Aldermen,  however,  has  practically 
foresworn  any  part  in  budget  making.  Deliberations,  so  far 
fn»n  lasting  twenty  days,  on  some  occasions  last  but  twenty 


Financial  Amhnistration:  Expenditures  47 


iMli 


minutes.  The  Finance  Committee,  to  which  the  budget  is  re- 
ferred, still  adheres  to  the  custom  of  holding  h^^ringft.  The 
public  is  largely  indifferent.  The  oocadons  since  1899  on  which 
the  Board  has  actually  asserted  its  charter  prerogatives  in  connec- 
tion with  the  budget  have  been  few.  Not  over  four  or  five 
times  in  these  twenty-seven  years  has  the  Board  of  Aldermen 
made  any  change.  Mandatory  items,  of  course,  may  not  be 
reduced.* 

The  Mayor  must  accept  or  disapprove  the  budget  in  toto,  except 
for  the  veto  of  alterations  made  by  the  Board  of  Aldermen.  He 
must  act  before  December  25.  The  budget  must  then  be  certified 
by  the  Mayor,  Comptroller,  and  City  Clerk,  and  pubUshed  in  the 
City  Record.^ 

The  ^^Terms  and  Conditions'^  of  the  Budget 

Each  budget  is  prrfaced  by  certain  stipulations  governing  the 

use  of  the  money  made  available.  These  are  known  as  the  ''Terms 
and  Conditions.'^  Beginning  in  1909  various  resolutions  have 
been  included  limiting  the  mode  by  which  the  budget  may  be 
altered  after  its  adoption,  particularly  with  regard  to  salaries  and 
wages. 

Former  requirements  relating  to  transfers,  payrolls,  and  time 
records  have  disappeared  and  the  present  regulations  are  con- 
cerned largely  with  the  filling  of  vacancies.  The  Board  of  Esti- 
mate has  established  two  sets  of  compensation  rates  and  apart 
from  certain  workers  in  the  institutional  departments  who  are 
specifically  provided  for,  all  vacancies  have  to  be  filled  at  the 
next  lowest  rate  except  on  permission  of  the  Board  of  Estimate. 
It  is  largely  the  operation  of  this  clause  that  gives  the  $2,000,000 
of  "accruals." 

Every  year's  budget  since  1910  has  contained  four  clauses 
requiring  that  contracts  and  orders  be  based  on  standard  specifica- 
tions, and  that  the  Comptroller,  before  registering  the  contracts 

or  auditing  orders,  certify  that  specifications  in  contracts  and 

^  For  the  mandatory  items  of  the  budget,  see  Appendix,  p.  271. 
*See C% Record,  December  14, 1926. 


New  York  City's  Finances  and 


deliveries  of  goods  on  orders  conform  to  the  standard  specifici^ 
tkHis.^  In  1920  a  fifth  clause  was  added: 

''Before  advertising  for  proposals  for  work  to  be  performed 
under  contract  and  chargeable  to  tl^  ....  Budget,  where  the 
cost  thereof  is  estimated  to  be  one  thousand  dollars  ($1000)  or 
more,  the  proposed  contract  and  specifications  shall  be  sub- 
mitted for  approval  to  the  Board  of  Estimate  and  Apportion- 
ment.'' 

This  is  a  desirable  provision  and  might  well  be  extended  to 
include  all  purchases  of  equipment  valued  at  more  than  $1000. 

A  new  section,  in  required  the  submission  to  the  Board 
of  Estimate  of  schedules  of  proposed  repaying  and  of  a  Comp- 
troller's certificate  of  the  acceptance  of  the  street  before  any 
contract  could  be  let  or  money  eiqpended  from  the  $7,000,000 
appropriated  for  paving.  This  is  a  sound  procedure  and  tbm 
is  no  reason  why  it  should  not  be  used  for  all  repair  and  equip- 
ment work  and  any  extensions  of  old  or  initiation  of  new 
activities. 

One  noticeable  shortcoming  of  these  ''Terms  and  Conditions'' 
is  the  lack  of  satisfactory  restrictions  on  the  transfer  of  appropria- 
tions. The  Corporation  Counsel  has  ruled  that  such  self-imposed 
limitations  are  nothing  more  than  gentlemen's  agreements  and 
in  BO  way  bind  the  Board  of  Estimate  should  it  later  disregard 
them.  The  same  ruling  would  doubtless  be  made  in  respect  of 
the  other  resolutions  contained  in  the  "Terms."  As  suggested 
below,  if  a  sound  poHcy  is  to  be  worked  out  in  connection  with 
"accruals"  or  the  inclusion  of  budget  appropriations  to  supplant 
Tax  Notes  and  various  issues  ci  Special  Revenue  Bonds,  it  is 
imperative  that  the  Charter  be  amended  to  limit  the  power  of  the 
Board  to  transfer  money  among  the  four  thousand  codes  in  the 
budget.  There  would  seem  to  be  no  reason  why  all  of  the  rules 
now  embraced  in  ihe  "Tmns  and  Conditions"  of  the  budget 
riioiild  not  be  carefully  revised  and  induded  in  the  Charter. 
Since  the  advent  of  home  rule  all  but  a  small  part  of  the  Charter 
may  be  altered  by  the  passage  of  a  Local  Law  with  the  concur- 

*Seeiiii.lO-lL 


Financial  Adiunkibaiion:  ExpsNDmrnBs  4S 


leaee  of  the  Board  of  Estimate  and  the  Board  (rf  Aldermen  and 

the  approval  of  the  Mayor. 

Appropriations  that  are  not  expended  revert  to  the  Tax  and 
Appropriation  Surplus  and  Deficiency  Account.  Eadi  year, 
usually  prior  to  October,  the  Board  of  Estimate  makes  a  transfer 
of  various  unspent  sums  from  the  budgets  of  the  preceding  and 
previous  years.  Thus  on  October  28,  1926  the  Board  made 
transfers  of  $3,281,738.86  from  unneeded  appropriations  for  the  • 
years  1910  to  1925.  Unexpended  appropriations,  however,  may, 
in  the  discretion  of  the  Board  of  Estimate,  continue  as  active 
appropriations  for  many  years.  Thus  the  ComptroUer's  Report 
for  1926  (p.  158)  shows  appropriation  accounts  amounting  to 
$3,732,026  stiU  open  from  Oie  budgets  for  1916  to  1925.  It  wiU 
be  noted  that,  were  accruals  to  go  automatically  into  this  Tax 
and  Appropriation  Surplus  and  Deficiency  Account,  they  would 
very  nearly  balance  it  and  obviate  the  tax  deficiency  approprii^ 
tion.^ 

What  has  been  said  is  sufficient  to  show  that  responsibility 

for  the  preparation  of  New  York  City's  budget  is  not  definitely 
located  in  the  chief  executive.  Responsibility  is  shared  by  the 
Board  of  Estimate  and  Apportionment,  its  staff,  the  Director  of 
the  Budget,  and  the  Comptroller.  Approval  by  the  charter 
legislative  body  — that  is,  the  Board  of  Aldermen  — is  most 
perfimctory.  Quite  different,  for  example,  is  the  procedure  in 
the  national  government.  The  estimates  are  prepared  under  the 
supervision  <rf  the  Director  of  the  Budget,  appointed  by  and 
directly  responsible  to  the  President.  The  President  assumes 
full  responsibility  by  transmitting  the  estimates  to  Congress  in  a 
budget  message.  Congress  then  makes  an  independent  and 
detailed  examination  before  the  appropriation  bills  become 
law. 

The  improvements  possible  in  respect  of  New  York  City's 
budget  system  depend  on  how  far  structural  change  can  be  made. 
The  real  budget-ratifying  authority  in  New  York  is  the  Board  of 
Estimate  and  Apportionment.  This  is  both  a  legislative  and  an 
administrative  body.   It  is  composed  of  the  Mayor,  the  Comp- 

^  See  Above  {>.  48. 


60 


New  York  Gity^s  Financbs  and 


troller,  the  President  of  the  Board  of  Aldermen,  and  the  five 
Borough  Presidents.   Persons  who  are  heads  of  large  spending 

departments  thus  have  a  considerable  share  in  determining  the 
size  of  their  own  appropriations.  The  presence  on  the  Board  of 
Estimate  and  Apportionment  of  members  who  are  administrar 
tors  and  in  ^ect  the  spokesmen  of  thdr  borough-comity  or- 
ganizations is  conducive  to  log-rolling  and  cooperative  extrava- 
gance. 

The  Mayor  should  assume  full  responsibility  for  the  budget 
proposals,  including  those  of  the  Boroi^^  Presidents,  as  submit- 
ted to  the  Board  of  Estimate  and  Apportionment.  The  Director 
of  the  Budget  should  continue  directly  responsible  to  the  Mayor, 
and  should  be  made  a  much  more  important  official  in  the 
preparation  of  the  budget.  The  entire  budget  preparing  or- 
l^mization  should  be  placed  imder  his  control.  The  Mayor 
would  then  be  responsible  for  the  financial  plan  of  the  city.  The 
Director  of  Investigations  and  the  staff  of  examiners  now  at- 
tached to  the  Board  of  Estimate  (but  working,  as  stated  above, 
in  codperation  with  the  Director  of  the  Budget)  should  be  trans- 
ferred to  the  budget  office.  This  office  should  have  the  standing 
of  a  city  department.  This  would  permit  the  Director  of  the 
Budget  to  be  vested  with  powers  of  subpoena  similar  to  those 
possessed  by  the  Commissioner  of  Accounts. 

The  Director  of  the  Budget  should  have  broad  powers  of 
control  subject  to  the  Mayor ^s  direction  over  the  execution  of  the 
budget  plan.  He  should  be  responsible  for  the  examination  and 
approval  of  the  budget  idlotments  during  the  year.  He  should 
have  supervision  over  expenditures  of  the  proceeds  from  Tax 
Notes  and  Special  Revenue  Bonds. 

n.  Revenxtes  anb  Exfenditubes 

The  so-caDed  budget  document  of  New  York  City  is  not  a  real 
budget.  It  is  little  more  than  an  itemized  appropriation  ordi- 
nance. It  contains  no  estimate  of  the  income  that  is  anticipated 
to  meet  the  expenditures  proposed.  This  statement  should  not 
be  interpreted  as  a  criticism  of  the  officials  who  are  concerned 


Financial  Administration:  Expenditukes  51 


with  the  preparation  of  the  budget.  They  perform  their  work 
honestly  and  efficiently  and  in  strict  compliance  with  the  provi- 
sions of  the  Charter.  The  criticisms  expressed  or  implied  in 

what  follows  relate  to  the  procedure  minutely  prescribed  by  the 
Charter.  Most  of  the  improvements  which  seem  desirable 
would  require  amendments  to  the  Charter  by  the  Municipal 
Assembly. 

New  York  City  now  derives  approximately  75  per  cent,  of  its 
revenue  from  the  general  property  tax.  The  remainder  —  about 
$125,000,(XX)  —  comes  from  miscellaneous  licenses,  fees,  subven- 
tions, etc.  These  revenues  are  considered  in  a  separate  chapter. 
They  have,  however,  a  connection  with  budget  making,  and 
must  be  briefly  discussed  here. 

The  State  Constitution  limits  the  amount  which  may  be  raised 
by  the  property  tax  for  city  and  county  purposes  to  2  per  cent,  of 
the  assessed  valuation  of  property  in  the  city  subject  to  taxation. 
In  order  to  keep  within  this  2  per  cent,  limit,  it  is  necessary  for  the 
budget  making  authorities  to  have  some  estimate  of  the  probable 
assessed  valuations.  They  should  also  know  what  may  be  ex- 
pected from  miscellaneous  sources  of  revenue.  In  practice,  the 
Board  of  Estimate  and  Apportionment  does  have  estimates 
of  bothy  but  they  are  quite  unofficial  and  are  not  made 
public. 

Of  $125,000,000  of  miscellaneous  revenues,  $80,000,000  goes 
to  the  General  Fund,  and  the  balance  is  pledged  by  law  to  specific 
objects.  The  amount  available  for  the  General  Fund  must  by  law 
be  deducted  from  the  amount  to  be  raised  by  the  property  tax, 
and  thus  directly  affects  the  city's  status  under  the  2  per  cent,  tax 
limits  The  official  figure  for  the  General  Fund  is  not  presented 
by  the  Comptroller  until  March  1,  the  day  the  tax  rate  is  to  be 
established.  Moreov^,  in  recent  years  the  practice  of  furnish- 
ing a  complete  itemization  of  the  revenues  which  go  into  this 
General  Fund  has  been  discontinued.  The  present  practice  is  that 
only  a  total  is  presented.  Failure  to  indicate  in  detail  precisely 
how  this  total  is  obtained  may  be  the  cause  of  the  sometimes 
rather  considerable  discrepancies  that  have  arisen  in  the 

^See  above  p.  24. 


82 


New  York  City's  Finances  and 


last  decade  between  the  amounts  estimated  and  the  amomits 
actually  received.^ 

These  estimates  are  made  at  the  time  the  tax  rate  is  fixed,  and 
appear  in  the  Report  of  the  Finance  Committee  of  the  Board  of 
Aldermen,  which  is  prepared  by  the  Department  of  Finance. 
They  are  gencaral  estimates,  unsupported  by  details  to  show 
iriiero  increases  or  cbereases  in  revenue  are  likely  to  occur.  Even 
the  g^eral  estimates,  as  has  been  said,  are  not  available  to  the 
pubUc  at  the  time  of  the  adoption  of  the  budget. 


BspendUurea  from  Special  Funds 

The  present  budget  includes  certain  expenditures  recoverable 
fnmi  specific  funds  or  sources.  It  does  this,  however,  in  such  a 
way  as  to  obscure  the  actual  apmJ&ooB  of  certain  departments. 

Thus  the  1927  budget  includes  the  following  items: 

^  Hw  fdlowiiig  table  oompareB  the  amountB  ertmiated  at  the  time  of  the  fixing  of 
the  tax  late  with  the  baianeeB  nsultiiig  at  the  end  of  each  year: 


GamBBAL  Fmro  and  Gekkrai.  Accotmr 


Estimated 

Actual 

Cash  Balancb 

Net  Gain  (+) 

Ykab 

RSCKIPTS 

RSYKNUa 

AT  End 

OB  Loss  (—) 

m  Ymmm 

1914  

•tt,235,935 

$40,707,859 

$103,564 

1915  

40331.063 

41,983.169 

3,233,694 

+  3,133,986 

1916  

41,203.238 

1,540,101 

-  1,696,849 

1917  

43.095.677 

920,910 

-  619,181 

1918  

»mm 

48.937.880 

3,575,258 

+  2,654.338 

1919  

4S331.760* 

55.827.764 

7,145,657 

+  3,570,489 

1920   

60.020.647 

75,063.818 

7,720,739 

+    574,992  . 

1921  

03.216.718 

72.123,390 

0.709,341 

-  953,398 

1922   

04.524.341 

70.648.745 

36,246 

—  6,731.095 

1923   

•* 

79.840,831 

7,904,241 

+  7,867,995 

1824   

04.609.241 

83.371.228 

10.711.275 

+  2,807.034 

1«SS  

73,592.004 

02,002.707 

10342.111 

-  309.103 

1928   

80.711.800 

100.178,748 

1927   

80,910.238 

• 

Note:  The  eatiinateB  oi  xeoeipts  girm  above  were  taken  from  the  Proceedingt  of  the  Board  of  Alders 
mm  on  the  occasion  of  fixing  the  tax  levy  each  year.  The  actual  receipts  maA  eMh  balsMM  tn  firm 
tfie  Financial  Summary  for  1990  And  the  aamial  Cim:flrMtr*»  RtporU, 

(♦)  Estimate  itemized. 

(**)  In  1923  no  estimate  was  made  and  the  entire  2%  allowed  by  the  Constitution  was  levied. 
Ttw  158,158,787  iimiiry  to  bakuiee  the  bwdeet  was  providsd  item  tbe  Qeawal  FwwL 


Financial  Administration:  Expenditures  53 


Corporate  stodc,  tax  notes,  as- 
sessment bonds,  and  speatl  umI 
trust  funds. 


1.  Law  Department  $  7Mfi2S    Street  and  park  openings  fund. 

2.  Board  of  Assesson  59,200   Street  improvement  fund. 

3.  Borough  President,  Manhattan  730,312 ) 

4.  Borough  President,  Bronx  490,521 

5.  Borough  President,  Brooklyn  1,016,206 

6.  Borough  President,  Queens  1,488,285 

7.  Borough  President,  Richmond  286,913 

8.  Department  of  Education  23,806,954    State  School  moneys 

9.  Department  of  Parks,  Richmond  3,500   Corporate  stock  or  tax  notes, 
la  Departmoit  ci  Health  75,316  Antitoxin  fund. 

11.  Dqtartment  of  Water  Supply  2,895,581  Water 

Gas  and  Electricity  84,189  Gnporate  stoek. 

12.  Department  of  Plant  and  Stnio- 

tures  290,000    Bridge  revenue. 

13.  Department  of  Docks  196,035   Corporate  Stock. 

Total  $31,747,635 

Of  the  thirteen  items  included  above,  1,  2,  8, 10, 11  and  12  are 
to  pay  what  are  practically  permanent  staffs  in  the  departments 
concerned.^  Failure  to  include  these  items  in  the  budget  totals 
operates  to  obscure  departmental  expenditures.  Thus  the 
1927  budget  really  provides  for  expenditures  by  the  departments 
ci  $31,747,635  more  than  the  total  of  $474,893,300.* 

>  There  is  no  good  reason  why  special  funds  like  the  antitoxin  fund,  bridge  tolls, 
water  revenues  and  school  moneys  should  not  go  into  the  General  Fund.  The  state 
school  moneys  (item  8)  formerly  went  into  the  General  Fund,  to  be  transferred  later 
to  the  Department  ct  Education's  appropriations  account.  This  practice  was  aban- 
doned in  1921. 

*  Departmental  expenditures  are  also  obscured  in  the  so-called  "budget  sum- 
mary" which  is  issued  at  the  time  the  budget  has  been  completed  by  the  Board  of 
Estimate.  The  budget  summary  is  a  single  sheet,  appearing  at  the  time  of  the 
"proposed  budget"  (see  below  p.  62).  It  presents  the  figures  of  the  previous  year's 
budget  (as  changed  by  transfers  to  July  1),  the  department  requests,  the  "tentative" 
and  "proposed"  budgets  for  the  165  operating  units  of  the  city  in  parallel  columns. 

The  1927  budget,  for  examine,  shows  a  departmental  total  of  199,296  for  the 
Board  of  Assessors,  which  is  in  charge  of  the  assessment  of  improvements,  as  against 
$92,370  in  1926;  yet  the  budget  summary  indicates  a  decrease.  This  is  because 
the  street  improvement  fimd  allowance  of  the  Department  has  risen  from  $46,840 
to  $59,200.  The  budget  summary  item  of  $40,096  for  1927  is  less  than  half  of 
what  the  Board  proposes  actually  to  spend. 

Ooeaaionany  the  esttmatea  of  revenue  diffw  greatly  fimm  tiie  actual  returns.  • 
Thus  in  the  eaae  of  the  bridge  toUs  received  by  the  Department  of  FUmt  and  Struc- 
tures, the  1925  budget  deducted  estimated  receipts  of  ^20,000  (Code  2761  TB) 
but  the  Comptroller's  Report  for  1925  (p.  20)  shows  an  actual  receipt  of  $306,847. 
This  is  not  a  bad  estimate,  but  the  record  certainly  does  not  appear  to  justify  the 
inclusion  in  the  1926  budget  of  an  estimate  of  $390,000.  That  year  the  receipts  fell  to 
$289,462  (Jbid.f  p.  20).  In  order  to  carry  the  Williamsburg  Bridge  employees  (1926) 
the  Department  was  forced  to  draw  upon  the  receipts  of  the  municipally  operated 
tiQllqr  line  wUdi  CRMMB  tha  bridge. 


54 


Nsw  YoBK  Cnnr's  FnuMcn  and 


9m 


The  present  City  Comptroller  has  gone  even  further.  Accord- 
ing to  his  summary  of  the  budget's  shortcomings  there  are 
fifty  millions  of  annual  expenditures  which  should  be  included. 
To  quote  him,  in  his  address  before  the  New  York  State  Chamber 
of  C<»nmerce,  December  2,  1926: 

"If  all  the  moneys  that  will  be  expended  in  1927  (with  the 
exception  of  funds  raised  by  bond  issues)  were  provided  for, 
the  budget  would  read  as  follows: 

Present  budget  $474,803^ 

For  salaries  of  Transit  Commission  (1927)  750,000 

For  snow  and  ice  removal  (1926-7)  (estimated)  2,500,000 

For  claims  and  judgments  (1927)  (estimated)  1,250,000 

For  non-revenue  producing  improvements  (1927)  (estimated)  8,750,000 

Making  a  total  of  $488,143,300 

''On  the  other  hand,  if  the  actual  cost  of  every  department, 
pension  fund,  or  other  city  activity  was  shown,  $41,793,806.18 
would  have  to  be  added  to  this  amount,  because  nineteen  city 
activities  expend  annually  $284,721,095.65  of  which  only  a  part 
is  provided  by  budget  appropriations,  the  balance  of  this 
amount  being  obtained  by  different  city  revenues  which  flow 
directly  into  the  various  departments,  funds,  etc.  The  De- 
partment of  Education,  for  instance,  receives  more  than  $23,- 
000,000  of  an  appropriation  from  the  state. 

"The  actual  expenditure  of  New  York  City  in  1927,  outside 
of  the  cost  of  improvements  financed  by  long-time  borrowings 
—  subways,  hospitals,  schools,  etc.,  will  be  approximately 
$530,000,000  instead  of  $474,893,300  carried  in  the  so-called 
budget  of  1927."  1 

It  would  seem,  therefore,  that  the  Comptroller  is  right  in  ques- 
tioning the  title  of  a  docmnent  which  neglects  certain  revenueSy 
and  omits  10  per  cent,  of  the  city's  current  expenditures. 

The  tentative  budget  fails  to  set  forth  the  changes  made  in 
the  previous  year's  budget  by  way  of  budgetary  transfers.  Special 
Revenue  Bonds  or  Tax  Note  issues.  Nor  does  the  budget  show 
what  Tax  Notes  or  Special  Revenue  Bonds  the  city  proposes  to 
iamie.  During  1926,  accruals  resulting  from  vacandes  and  posi- 
tions filled  at  the  minimum  rates  amounted  to  nearly  $2,000,000. 

'  December  Bvlletin,  Chamber  of  Commerce,  p.  28.  It  should  be  remarked  that 
some  of  the  items  mentioned  by  the  Comptroller  are  included  in  the  1927  budget  in 
the  form  of  debt  service  for  the  previous  year's  expenditures. 


Financial  Administration;  Expenditubes  55 


This  money  is  available  for  any  purpose  to  which  the  Board  of 
Estimate  and  Apportionment  sees  fit  to  devote,  it.  Some  <rf  the 
larger  1926  grants  from  this  money  were  as  fdlows: 


Plant  and  StructureB   $29  599 

Public  Welfare   66*755 

 !    !    !  92^000 

Pohoe   263,853 

5?»  „  •    •   36,000 

City  Record   60,000 

Lincoln  Hospital  ,  131,666 

President,  Borough  of  Queens                                     .  40(^862 


The  result  is  that  many  requests  which  are  rejected  at  budget 
making  time  reappear  and  obtain  aomial  moneys  or  transfefs 
during  the  fiscal  year. 

The  Board  of  Estimate  and  Apportionment  is  permitted,  under 
section  237  of  the  Charter,  to  transfer  money  from  any  appropria- 
tion in  the  budget  to  any  other  appropriation.  From  1913  to 
1916  the  Board  set  certain  limitations  on  the  transferring  of  salary 
money  to  other  than  personal  service,  or  vice  versa,  but  an  opinion 
of  the  Corporation  Counsel  held  that  such  limitations  are  merely 
voluntary  and  have  no  binding  effect  upon  subsequent  action  by 
the  Board.  The  amount  of  annual  budget  transfers  during  the 
last  ten  yeare  has  ranged  around  $5,000,000,  except  for  the  years 
1918,  1919,  and  1920,  when  it  went  noticeably  higher,  reaching 
$8,500,000  in  the  latter  year. 

The  ComptroUer's  Report  for  im  indicates  the  effect  of  trans- 
fers on  the  budget  plan  of  that  year.  The  total  appropriation 
shown  m  the  1926  budget  was  $437,000,000,  of  which  $407,481,- 
417  was  appropriated  to  the  city  government,  and  $11,953,773 
to  the  five  county  governments.^  Transfers  made  m  these  appro- 
priations during  the  year  aggregated  $6,139,957.  However, 
this  does  not  mdicate  the  far-reaching  effect  of  the  transfers  on 
the  appropriations  of  the  various  departments  and  agencies  of  the 
city  and  county  governments.  With  the  exception  of  the  educar 
tional  ag^des  and  some  mmor  activities,  the  appropriations  of 
practically  every  department  and  agency  were  changed.  Appro- 
priations for  the  Board  of  Elections,  the  Department  of  licenses, 

^  The  biluioe  is  for  state  tms. 


56 


New  Tobk  Cmr's  Finances  and 


the  President  of  the  Borough  of  Brooklyn,  the  Board  of  Ambu- 
lance Service,  and  the  payments  to  private  charitable  institutions 
were  sUghtly  decreased.  The  increases  were  met  by  the  transfw 
6t  $550,000  from  the  appropriation  for  debt  service,  $1,068,995 
from  the  appropriation  for  miscellaneous  city  purposes  ($550,000 
of  this  was  for  the  purpose  of  equalizing  salaries  and  wages),  and 
$1,587,396  from  accruals. 

The  budget  comprises  3804  codes.  During  1026,  446  of  these 
were  debited,  and  511  added  to  by  budget  transfers.  Many  of 
these  relate  to  transfers  from  the  $1,000,000  fund  set  aside  for 
salary  adjustments,  but  only  110  seem  to  be  definitely  within  this 
category.  The  total  of  the  budget,  of  course,  remained  the  same, 
but  the  budget  plan  for  the  year  was  materially  changed  by 
the  wholesale  transfer  of  appropriations,  not  only  between  items, 
but  between  organization  imits.  The  itemized  appropriation  bill 
as  a  means  of  financial  control  is  inadequate  when  such  a  pro- 
cedure is  followed  by  the  Board  of  Estimate  and  Apportionment. 

There  is  need  of  a  word  of  explanation  with  regard  to  the  ac- 
cruals." The  term  is  pecuhar  to  New  York  City.  There  is  a 
continual  turnover  among  the  city  employees.  When  a  given 
position  is  again  filled,  the  new  employee  is  generally  appointed  at 
a  lower  salary  grade.  The  current  salary  appropriation  covered 
the  old  employee  with  the  higher  salary  scale,  so  that  there  is  a 
saving  in  the  departmental  salary  appropriation.  If  a  position  is 
Mi  vacant,  the  salary  appropriated  for  the  position  remains  un- 
expended. In  either  case,  the  saving  is  known  as  an  "accrual.^' 
The  total  undeducted  accruals  for  a  year  are  not  an  inconsider- 
able item,  and  may  run  as  high  as  $2,000,000. 

The  use  of  accruals  has  also  led  to  budgetary  confusion.  In 
scnne  departmental  estimates  they  are  accounted  for;  in  others 
they  are  relied  on  to  meet  anticipated  expenditures  not  always 
shown  in  the  budget.^  Many  of  the  departments,  with  large 

lAfieruabuesometimes  incorporated  in  the  budget,  e.  g.,  (1925  and  1926  budgets): 

President,  Borough  of  Manhattan 
CSode363   CSue of  Puldic  Buildings  and  Office: 

1.  Tdephone  Operator   .    .    .at  I960        (10 months)  

2.  Attendant  at  $1,500    (290  months)  

(Aeeniaki  from  Code  358  to  fanuab  nBiw—iy  fcmds  for  thk  aohediile) 


Financial  Administration:  Expenditures  67 


personnels,  could  calculate  and  deduct  their  accruals.  The  De- 
partment of  Education,  which  makes  the  most  precise  estimates, 
deducted  $4,867,806  from  its  1«27  salary  estunates.  The  Police 
and  Kre  Departments  make  slight  estimates  which  amounted  to 
$325,000  and  $100,000  respectively  in  1927  (budget  Codes  1602 
and  1656).  The  Department  of  Education  accruals  represent 
almost  6  per  cent,  of  the  salary  appropriation,  whereas  deduc- 
tions in  the  other  departments  are  less  then  1  per  cent.^ 

The  Charter  (Section  188,  subdivision  8)  makes  definite  pro- 
vision for  emergencies  not  anticipated  in  the  budget.  Under  this 
subdivision  the  Board  of  Estimate  may,  by  unanimous  vote,  upon 
recommendation  of  three-fourths  of  aU  the  members  of  the  Board 
of  Aldermen,  authorize  the  issuance  of  Special  Revenue  Bonds, 
except  that  the  amount  issued  in  any  one  year  ahi^^H  not  exceed 
S2,(X)0,0(X).  Accruals  and  budgetary  transfm  may  be  used  for 
the  same  pmpose  by  a  majority  vote  of  the  Board  of  Estimate 
alone. 

The  Charter  should  provide  that  undeducted  accruals  should  go 
into  the  Tax  and  Appropriation  Defici^cy  and  Surplus  Account. 
K  applied  to  this  account,  the  present  accruals  would  practically 
obviate  the  tax  deficiency  appropriation.  Certainly  transfers  of 
accruals  which  are  in  effect  evasions  of  Section  188  of  the  Charter 
should  not  be  tolerated.  If  the  $2,000,000  provision  for  mergen- 
des  to  be  administered  in  conjunction  with  the  Board  of  Alder- 
men, which  that  section  provides,  is  not  enough,  it  should  perhaps 
be  increased  to  $3,000,000. 

Financing  of  Current  Operations  hy  Borrowing 

Besides  the  additions  to  departmental  allowances  made  possible 
through  transfers  of  accruals,  various  sums  are  made  available 
through  short  term  bond  issues,  principally  Special  Revenue 
Bonds  and  Tax  Notes.^  Some  notion  of  the  additions  to  the  1926 

^  It  should  be  remariced  that  the  proportionate  turnover  among  teachers  is  prob- 
ably much  larger  than  among  other  classes  of  city  employees. 

2  Special  Revenue  Bonds  are  one-year  bonds,  issued  under  authority  of  section 
188  of  the  Charter  for  various  special  purposes  therein  set  forth.    They  must  be 
redeemed  in  the  next  year's  budget.  Tax  Notes  are  likewise  required  to  be  redeemed 
within  one  year.   They  represent  outlays  for  non-revenue  producing  improvements 
For  the  diiFeiienoebet«reea%wdal  Revenue  Bonds  and 


58 


New  York  Cttt's  Finangbs  and 


budget  through  this  borrowing  may  be  gleaned  from  the  following 
figures,  taken  from  the  Comptroller's  Report  for  1926^: 

The  total  amount  of  Special  Revenue  Bonds  authorized  under 
Section  188  and  various  other  sections  of  the  Charter  and  manda- 
tory state  laws  during  1926  was  $22,041,865.  The  largest  items 


were  as  follows: 

Annory  Board   I  280,099 

Board  of  Transportation   3,636,059 

Claims  and  judgments   3,423,039 

Transit  Commission   700,798 

Dq[)ariment  of  Street  Gleaning  (mostly  snow  lemoYal)  .  8,225,133 

Fire  D^Murtment  (Rdief  Fund)   1,793,345 

Borough  President  of  Queens  (mostly  snow  removal)      .  1,175,987 

Voting  Machines  -    .  579,968 

Under  subdivision  8  (the  $2,000,000  allowance  for  emergencies) 
$1,924,939  of  Special  Revenue  Bonds  were  authorized.  Some  of 
the  larger  items  were: 

Board  of  aty  Record   $300,000 

D^rtment  of  Public  Welfare    ........  89,727 

County  Clerks   61,000 

Department  of  Plant  and  Structures   285,000 

Department  of  Correction   65,000 

Police  Department   608,100 

Borougb  President  of  Broddyn   00,900 

Borough  President  of  Queens     .   95,375 

Begisteis   58,393 

Besides  these  short  term  bonds,  $16,500,000  of  Tax  Notes  were 
authorized  during  1926  under  Section  189  of  the  Charter.  Among 
the  larger  items  were: 

Board  of  Transportatiim   %  380,105 

Department  of  Plant  and  StraetoraB   893,285 

Board  of  Education   250,000 

Department  of  Parks,  Queens   249,000 

Fire  Department   463,000 

Police  Department   75,000 

Borough  President,  Brooklyn   2,563,175 

Borough  President,  Manhattan   3,045,236 

Borough  President,  Queens   1,025,695 

Borough  President,  Richmond   789,200 

Borough  President,  Bronx   2,035,665 


There  are  certain  serious  objections  to  the  present  method  of 

financing  expenditures  by  borrowing.    In  the  first  place,  many  of 

1  Pp.  165,  175  (fecial  Revenue  Bonds);  231  (Tu  Notes),  and  182  (Ckirpoiate 
Stock), 


Financial  Administration:  Expenditures  59 


these  expenditures,  financed  through  Special  Revenue  Bonds  and 
Tax  Notes,  and  in  some  cases  through  Corporate  Stock,^  should 
appear  in  the  budget.  One  or  two  inadequate  attempts  have 
been  made  this  last  year  to  include  such  items,  but  upwards  of 
$26,000,000  will  probably  be  spent  during  1927  for  which  no 
provision  was  made  in  the  budget.  There  is  thus  an  iJisenoe 
of  effective  planning  of  these  expenditures,  and  the  operating  costs 
of  various  departments  are  obscured. 

The  Board  of  Estimate  has  just  resurrected  the  Tax  Note 
budget,  which  died  almost  at  birth  in  1914.  The  present  pro- 
cedure is  simple  and  short.  In  December  of  last  year  the  depart- 
ments were  called  upon  to  prepare  their  requests.  These  were 
printed  in  a  calendar  and  considered  in  executive  session  of  the 
committee  of  the  whole  on  February  11.  Allotments  amounting 
to  $12,000,000  wwe  recommended  to  the  Board  of  Estimate  and 
Apportionment.  This  was  the  first  of  several  such  allotments, 
but  it  at  least  required  competitive  projects  to  be  considered  in 
some  relation  to  one  another.  The  restoration  of  the  Tax  Note 
budget,  however,  will  not  cure  sevmd  of  the  most  important 
difficulties  in  connection  with  this  financing  through  short  term 
borrowings.  The  difficulty,  as  has  been  said,  is  that  these  ex- 
penditures do  not  appear  in  the  budget  of  the  year  in  which  they 
are  made.  When  they  appear  in  the  following  year's  budget 
they  are  embraced  under  redemptions  and  dd[>t  service,  and  there 
is  no  indication  of  the  purposes  for  which  the  issues  were  made. 
Thus  during  a  winter  as  much  as  $5,000,000  may  be  spent  for 
snow  removal.  This  money  will  be  obtained  from  Special  Rev- 
enue Bonds,  and  will  be  included  in  the  debt  service  items  of  suc- 
ceeding budgets.  Secondly  the  practice  of  borrowing  money  and 
paying  it  back  the  next  year  adds  an  interest  charge  amounting  to 
approxmately  $2,000,000. 

New  separate  authorizations  after  the  adoption  of  the  budget 
frequently  so  result.  There  is  a  tendency  to  adopt  separate 
personal  service  schedules,  chargeable  to  these  funds.  Persons 
given  employment  on  improvements  paid  for  by  Tax  Notes  and 
Special  Revenue  Bonds  are  not  always  impressed  with  the  fact 

^  Blany  d^MurtmentB  mpgaii  permanent  staffs  through  Corporate  Stock  funds. 


60 


New  York  City^s  Finances  and 


that  their  employment  is  purely  temporary.  They  come  to 
regard  themselyes  as  permanent  employees,  and  when  the  Tax 
Note  or  Corporate  Stock  fimds  are  exhausted,  strong  pressure  is 
exerted  to  find  new  work  for  them  to  do.^ 

Many  Special  Revenue  Bond  items  which  appear  trivial,  involve 
permanent  and  occasionally  large  items  in  subsequent  budgets. 
Frequently  new  activities  are  introduced  through  Special  Revenue 
Bonds  or  the  transfer  of  funds  and  become  fixtures  in  the  budget. 
For  example,  the  Board  of  Child  Welfare  started  with  less  than 
$100,000  (from  Special  Revenue  Bonds)  and  now  receives  an 
appropriation  of  over  $5,500,000.  It  is  doubtful  if  the  Board  of 
Estimate  gives  Special  Revenue  Bond  appropriations,  transfers 
of  funds,  or  modifications  of  schedules  the  same  care  and  attention 
that  it  bestows  upon  the  budget  itself. 

If,  however,  tax-note  and  snow  removal  appropriations  are  to 
be  provided  for  in  the  budget  —  that  is,  in  the  current  year's 
budget  and  not  in  the  following  year's  budget  under  temporary 
debt  —  it  is  particularly  important  that  provisions  be  inserted  in 
the  Charter  to  prevent  the  diversion  of  these  funds  by  transf ^ 
to  oilier  purposes.  Such  matters  diould  also  be  carefully  sched- 
uled in  terms  of  work  proposed  to  be  accomplished.^ 

1  What  should  be  done  about  this  situation  is  not  certain.   A  feasible  plan  might 

be  the  adoption  of  an  elastic  schedule  in  connection  with  the  budget.  Such  a  aehedule 
could  be  expanded  to  meet  additional  work  as  it  becomes  necessary.  Perhaps  some 
of  the  work  could  be  done  by  contract  rather  than  by  the  city  and  borough  depart- 
ments themselves.  The  point  here  is  not  how  efficiencies  and  economies  may  be 
secured.  The  point  is  simply  that  the  budget  document  of  the  city  fails  to  tell  the 
whole  stoiy  in  respect  of  expenditures. 

*  Snow  removal  is  a  difficult  budgetary  problem.  The  amount  of  snow  which  falls 
in  the  city  varies  greatly  from  winter  to  winter.  Weather  conditions  vary  as  well, 
so  that  the  cost  of  snow  removal  may  go  as  high  as  five  miUion  dollars  (1925-26) 
or  it  may  be  as  low  as  one  million  dollars.  The  snow  period,  moreover,  includes  parts 
of  two  fiscal  years  and  the  handhng  of  the  problem  is  not  centraUzed.  The  Borough 
Presidents  have  jurisdiction  over  it  in  Queens  and  Richmond  and  the  Department  of 
Street  Oeaning  in  the  remainder  of  the  city.  In  recent  years  two  Conmiissioners  of 
Accounts  have  felt  compelled  to  investigate  these  expenditiires. 

As  has  been  said,  no  attempt  is  made  to  provide  for  snow  removal  in  the  budget. 
The  cost  both  of  the  work  and  of  the  equipment  has  been  financed  solely  through  the 
issuance  of  Special  Revenue  Bonds  under  authority  granted  by  Section  546  of  the 
Charter.  The  only  relevant  provision  in  the  budget  relates  to  the  redemption  of 
^Deeial  Revenue  Bonds  issued  during  the  previous  year.  No  indication 
is  giv«i  in  any  of  t^  budget  documents  as  to  the  amounts  whieh  portam  to  snow 
lemovil.  It  should  be  noted  that  the  eqaqHoont  pureliMed  wHh  thsee  bondi  is 


Financial  Administration:  Expenditures  61 


Some  changes  that  might  be  made  in  the  content  of  New  York 
City's  budget  are  indicated  in  the  discussion  above.  The  budget 
should  estimate  all  miscellaneous  leodpts  of  the  city,  and  should 
show  what  tax  rate  will  be  necessary,  on  the  basis  of  the  assessed 
valuations,  to  meet  the  proposed  expenditures.  The  budget 
should  also  indicate  what  projects  it  is  proposed  to  finance  from 
long-tenn  bonds.  All  of  these  mattm  should  be  f  ormaUced  and 
presented  to  the  Board  of  Estimate  so  that  the  budget  docmnent 
will  give  a  complete  picture  of  the  financial  situation  at  the  time 
the  budget  is  adopted.  This  question  is  discussed  further  in 
Section  IV. 

III.  The  Bxtdqbt  Document  and  the  Appbofbiation 

Ordinance 

The  puipose  of  a  budget  should  be  to  furnish  information  and 
to  serve  as  a  means  of  planning  the  ^cpenditures  and  revenues 

of  a  givQn  year  so  that  they  will  balance  satisfactorily.  The 
purpose  of  an  appropriation  bill  is  to  enact  into  law  the  general 
outlines  of  the  final  expenditure  plans  adopted,  to  establish  re- 
sponsibility for  their  execution,  and  to  control  genmd  policies. 
Though  these  purposes  are  closely  related,  they  are  distinct,  and 
experience  shows  that  they  cannot  be  satisfied  with  a  single 
document. 

Present  Bvdget  Documents 

The  expenditure  estimates  for  New  York  City  appear  in  the 

following  printed  documents: 

(1)  The  departmental  estimates.  These  are  printed  separately 
in  the  CUy  Record^  though  in  the  last  few  years  the  printing  has 

frequently  available  the  year  round  and  in  some  cases  it  appears  that  the  departments 
count  on  snow  removal  money  to  meet  their  equipment  needs.  Financing  snow 
ranoval  by  one  year  bonds  adds  an  interest  charge  that  may  run  to  $200,000. 

It  is  highly  doubtful  if  it  would  be  wise  to  i^jxropriate  for  snow  removal  in  the 
Budget.  If  it  is  decided  to  do  so,  provision  should  be  made  that  moneys  not  needed 
shall  revert  to  the  Tax  and  Appropriation  Deficiency  and  Surplus  Account.  In  any 
event  an  attempt  should  be  made  to  report  on  snow  removal  in  terms  of  the  actual 
work  accomplished  and  the  circumstances  of  the  weather.  It  would  seem  that  the 
snow-removing  departments  should  be  required  to  make  a  detailed  report  to  the 
Bowd  of  Estimftle  some  time  in  .^nfl  or  Bli^  of  eadi 


62 


Nmw  Yobk  City's  Finances  and 


been  almost  too  late  to  make  the  estimates  available  for  scrutiny 
by  the  taxpayers  in  advance  of  the  budget  disouanon.   As  printed, 

these  estimates  show  the  allowances  for  the  previous  year  and 
the  requests  for  the  coming  year.  These  estimates  do  not  show 
the  previous  appropriations  as  modified  by  transfers  nor  do  they 
show  what  other  money  the  departments  may  have  had  from 
Tax  Notes  or  Special  Revenue  Bonds. 

(2)  The  ''tentative  budget''  This  adds  to  the  departmental 
estimates  an  additional  column  showing  the  allowance  tentatively 
recommended  by  the  Board  of  Estimate.  In  pfactioe,  these 
amounts  are  substantially  the  figures  suggested  by  the  Director  of 
the  Budget.  The  tentative  budget  must  be  prmted  by  October 
10,  and  is  subject  to  increase.  PubUc  hearings  are  held,  revisions 
made,  and  the  budget  is  then  isEmd  as: 

(3)  The  'proposed  budget.''  From  this  time  on,  according  to 
the  Charter,  no  further  increases  may  be  made.  The  proposed 
budget  contains  a  fourth  colimm.  It  now  shows  the  last  year's 
appropriations,  the  departmental  requests,  the  tentative  allow- 
ances, and  the  still  further  revised  "proposed"  allowances.  The 
proposed  budget  is  printed  by  October  20.  In  each  copy  is 
inserted  a  loose  page  containing  an  expenditure  summary.  The 
summary  shows  the  same  columns  as  the  proposed  budget,  ^ving 
only  the  totals  for  each  of  the  165  operating  units.  In  the  1927 
"budget  summary,"  the  first  column  was  altered  to  show  the 
1926  budget  as  modified  to  July  1,  but  not  including  accruals  or 
spedal  revenue  bonds.  The  proposed  budget  is  completed  by 
October  31.  It  represents  the  final  recommendation  of  the 
Board  of  Estimate  and  goes  to  the  Board  of  Aldermen  for  final 
adoption.    When  adopted  it  becomes: 

(4)  The  budget,  so  called,  which  is  the  appropriation  ordmance 
passed  by  the  Board  of  Estimate  and  Apportionment.  This 
budget  is  then  printed  in  the  City  Record  in  pursuance  of  the 
charter  requirement.  The  Board  of  Aldermen  must  act  on  the 
budg^,  or  ordinance,  before  Novemb^  26.  A  month  or  so  later  a 
mnaller  and  handier  edition  of  the  budget  is  prepared.  To  this 
edition  are  added,  in  the  front,  tables  showing  the  amounts  for 
each  of  the  budget  classifications.  As  a  forty-odd  page  appendix 


Financial  Administration;  Expenditures  63 

to  the  volume  there  is  added  the  Comptroller's  debt  service  state- 
ment. This  is  not  presented  in  detail  at  budget  maJring  time. 
An  elaborate  supporting  schedule,  however,  arrives  in  time  for 
inclusion  in  the  final  printing  of  the  approved  budget.  The 
following  tables  are  included: 

1.  Amount  of  bonds  maturing  in  the  current  year. 

2.  Interest  on  existing  debt  and  estimate  for  new  debt. 

3.  Debt  classified  by  purpose. 

4.  Debt  classified  by  rate  of  interest. 

5.  Basis  for  the  Tax  Deficiency  Appropriation  or  bad  debt 

account. 

6.  Budget  accounts  since  1905  with  operating  sheet  and 
balances. 

An  effort  should  be  made  to  have  available,  when  the  budget 
estimates  are  bemg  discussed  by  the  Committee  of  the  Whole, 
data  such  as  the  above  rather  than  the  mere  totals  which  must 
be  included  in  the  budget.    Moreover,  debt  service  is  the  second 
largest  item  in  the  budget.    It  amounts  to  $137,356,554  in  1927.i 
The  statements  which  are  included  have  not  since  1921  shown 
the  purposes  for  which  Tax  Notes  and  Special  Revenue  Bonds 
have  been  issued.    Failure  to  show  in  detail  the  nature  of  this 
temporary  debt  which  is  being  redeemed,  and  for  which  depart- 
ment and  for  what  purpose  it  was  issued,  serves  to  obscure  the 
puiposes  o£  these  dty  expenditures.   As  has  aheady  been  indi- 
cated, a  considerable  amount  of  this  short  term  borrowing 
could  be  eliminated.    It  is  nevertheless  important  to  indicate 
what  is  bemg  redeemed,  for  if  attention  is  focussed  on  these 
items,  greater  care  may  be  exercised  in  following  years.  It 
would  be  wise  to  include  also  in  connection  with  each  depart- 
ment's appropriation  the  debt  service  for  temporary  and  perma- 
nent debt  incurred  in  its  behalf,  e.g.,  ferry  and  trolley  bonds  in 
the  Departmmt  of  Plant  and  Structures;  dock  bonds  in  the 
Dock  Department;  and  school  bonds  in  the  Department  of 
Education.    This  should  not  take  the  place  of  the  active  appro- 
priations for  debt  service  which  should  be  assembled  at  one  place 

» That  is,  97  millions  for  the  long  term  debt  and  40  millions  for  interest  on  and 
ledemption  of  tbe  short^eim  debt.  See  below  p.  214. 


64 


New  York  City's  Finances  and 


in  the  budget,  but  should  be  added  merely  to  show  complete 
departmental  operating  costs. 

The  1926  debt  service  estimate  aeenm  to  have  exceeded  the 
actual  requirements  by  $550,000.  This  sum  was  subsequently 
transferred  by  the  Board  of  Estimate  to  the  Police  Department.* 
It  ^ould  be  noted  that  any  estimate  made  for  debt  service  on 
the  permanent  dd>t  is  not  subject  to  the  two  per  cent,  oonstitu- 
tional  tax  limit.  A  number  of  years  ago  one  of  tlie  debt  service 
accoxmts  was  deliberately  used  to  protect  an  appropriation  from 
a  hostile  Board  of  Aldermen.^  This  possibility  offers  an  addi- 
tional reason  for  incorporating  in  the  Charts  restrictions  upon 
transfm.*  Any  surplus  resulting  from  an  over-estimate  d  debt 
service  needs  should  certainly  go  automatically  into  the  Tax  and 
Appropriation  Deficiency  and  Surplus  Accoimt.  If  there  is  one 
estimate  that  can  be  made  in  itemized  form,  it  is  that  for  debt 
service. 

The  Comptroller  no  longer  submits  a  detailed  schedule  of  the 
$800,000  which  the  city  pays  out  in  rents.  Such  a  schedule  was 
rarely  on  hand  when  the  estimates  were  being  considered,  but  it 
was  formerly  included  in  the  papers  putdisbed  with  the  Board  (d 
Estimate  minutes  when  the  budget  was  adopted  on  October  31. 
This  schedule  should  appear  in  full  with  the  estimates  and  in  the 
budget  document. .  It  is  important  that  the  Budget  Director 
shodd  have  mch  information.  It  is  not  now  available.  The 

^  Except  for  $50,000  which  was  transferred  to  the  Finance  Department. 
*  The  1913  budget  was  somewhat  mutilated  by  the  Board  of  Aldermen.  The 
City  Administration  knew  that  an  aiypropriation  for  salary  standardisation  had  no 

dbanoe  of  being  approved,  and  so  it  was  not  included  in  the  budget.  At  the  first 
meeting  of  the  Board  of  Estimate  during  the  year  1913,  the  Committee  on  Standardi- 
lation  of  Salaries  and  Grades  presented  a  communication  which  read  in  part:  "No 
provision  was  made  in  the  Budget  for  1913  for  continuing  the  work  of  the  Conmiittee 
on  the  Standardization  of  Salaries  and  Grades,  of  the  Board  of  Estimate  and  Appor- 
tionment. The  work  is  now  weUmider  way  and  oonskknMeprogreflB  has  been  made. 
hk  <xder  to  continue  to  the  achievement  of  definite  results,  it  is  necessary  to  provide 
funds  for  the  Committee."  The  Board  of  Estimate  therefore  approved  the  transfer 
of  funds  appropriated  for  1913  as  follows:  "From  Debt  Service,  Interest:  108. 
Interest  on  Bonds,  Stocks  $50,000,  to  Department  of  Finance:  93.  Con- 
tingencies, Work  of  Committee  on  Standardization  $50,000."    Whether  the 

$2,000,000  debt  service  item  from  which  the  $50,000  was  taken  had  been  inoreased  to 
allow  for  this  tianrfer  does  not  apjpeai  £rom  Ihe  record.    Mmule»  ti  As  Board  tf 
Mttimat^  and  Apportimrnmi  u/UmCUif^  Nm  Ymk,  Jmmty  %  1913,  p.  8M. 
•SeeiKMb 


Financial  tK/fbtwrRATiON:  Expenditubbs  65 


Comptroller  certifies  to  the  reasonableness  of  rental  charges. 
The  power  to  approve  leases  is  now  vested  iu  the  Sinking  Fund 
Commission.  It  is  an  appropriating  function  and  should  be 
transferred  to  tiie  Board  of  "Estimate  because  these  leases  commit 
the  city  to  a  definite  obligation.  The  Board  could  require  that 
the  Director  of  the  Budget  investigate  the  need  for  the  lease  and 
that  the  Real  Estate  Division  oi  the  Finance  Department  r^Knrt 
on  the  reasonableness  of  the  proposed  rental.  The  appropriation 
for  rentals  asked  for  in  the  budget  should  be  based  on  detailed 
schedules  showing  the  leases  arranged  by  departments,  their 
locations,  terms,  dates  of  expiration,  and  annual  rates  of  payment. 
Inf(nrmati<m  as  to  rental  charges  sbould  be  shown  by  including 
a  rent  code  in  each  department's  budget,  as  was  suggested  in 
regard  to  debt  service. 

likewise  the  statement  of  tax  deficiencies  should  be  submitted 
in  suppcnrt  of  the  sum  induded  in  the  budget  for  that  purpose.^ 
The  details  are  not  available  until  the  budget  is  finally  printed 
during  the  following  January.  There  seems  to  be  no  good  reason 
why  they  could  not  be  estimated  in  September. 

The  documwts  that  have  been  listed  are  the  only  sources  <tf 
information  for  the  citizen.  They  are  too  scattered  to  be  of  any 
real  use.  A  layman  may  always  have  some  difficulty  in  un- 
raveUing  the  tangled  skeins  of  a  detailed  financial  statement, 
but  such  a  statem^t  should  be  at  least  available,  and  an  effort 
should  be  made  to  have  it  as  intelligible  as  possible.  New  York 
City  furnishes  no  financial  statement  at  the  time  the  budget  is 
made.  The  informational  side  of  New  York  City's  budget  is 
almost  entirely  lost  sight  of.  The  only  attempt  now  being  made 
to  present  budget  information  in  easily  assimilable  form  is  to  be 

*  This  appropriation  is  required  by  Chapter  209  of  the  Laws  of  1906  as  amended 
by  Chapter  220  of  the  Laws  of  1917.    In  1926  the  account  stood  thus: 

LoMM  Gain* 
Dbeomtto  for  pioinpt  pAyment  of  By  appropriation  t71,2394M)8 

taxes  $5,548,665       Gain  and  losses  in  taxes      .    .    .  7,105,170 

Taxes  cancelled  by  courts  1905-1924  51,773,428  Surplus  appropriations  ....  20,255,321 
UaaoilaBlabistMwlQOfr'mi    .    .  88.700,000      MisoiiHaiiaom   4.890.515 

  6,531,879 


•110,088,008  9110,088,008 

Th«  ddkit  !■  made  up  by  tnuMlw  of  napliiMs  from  prsviow  ymn  appropriatkm  amoimtinc  to 
i8Jtl.m  MiA  a  **  tM  MteMBT*'  WPOpciatioa  in  1087  budcet  of  $3,850,000. 


66  New  York  Crnr^s  Finances  and 


found  in  four  pages  of  tables  prepared  by  the  Bureau  of  Account- 
ancy of  the  Department  of  Fmance  and  pubhshed  at  the  end  of 
the  handy  edition  of  the  budget,  whieh,  as  has  been  said,  is  iasued 
in  January,  t.e.,  after  the  budget  has  been  finaUy  adopted.  One 
of  these  tables  summarizes  the  total  tax  budget  appropriations 
by  assembling  into  one  group  the  appropriations  of  each  depart- 
ment or  divisicm  of  the  governmrnt  whose  functions  are  akin, 
and  shows  the  percentum  which  each  group  total  bears  to  the 
total  amount  of  the  appropriations  for  all  such  purposes.  These 
tables,  however,  are  not  available  at  budget  making  time,  when 
they  would  be  of  most  use. 

When  the  budget  is  bdng  made  its  informational  aspects  are 
abnost  ignored.  It  should,  nevertheless,  be  possible  to  present 
much  useful  information  in  connection  with  the  budget  document. 
Included  in  it  there  might  be  operation  data,  tables  of  per  capita 
and  unit  costs,  and  graphs  and  charts,  not  only  of  revenue  and 
expenditures,  but  of  population  growth  and  departmental  services. 
There  might  also  be  maps  of  service  areas  and  much  other  useful 
information  designed  to  give  both  citizens  and  the  appropriation 
granting  authorities  a  ocnnplete  i^eture  oi  what  is  being  proposed. 
The  budget  of  the  national  govemmoit,  for  example,  oontams 
several  pages  of  chart  presentations  showing  the  divisions  of 
appropriations  by  organization  units  and  government  functions, 
and  classifying  estimated  receipts  by  sources  of  revenue.  The 
national  budget  is  presented  to  Congress  with  a  message  from 
the  President  discussing  in  general  terms  the  financial  policies  of 
the  government.  likewise  the  city  budget  should  be  summed 
up  in  a  message  from  the  Mayor.  This  message,  prepared  in 
sunple  form,  could  be  given  much  wider  dreulation  thaii  is  possible 
for  a  technical  budget  docmnent.* 

From  this  brief  siunmary  of  the  various  documents  which 
lepresent  the  so-called  '^budget''  in  its  successive  stages,  it  will  be 

1  In  1915,  Mayor  Mitchel  prepared  a  message  on  the  budgetary  requirements 
of  the  Mayor's  departments,  showing  their  relative  growths  and  explaining  the 
projects  for  the  coming  year.  This  was  published  as  a  pamphlet,  and  was  ready  in 
August  of  that  yen.  The  experiment  was  not  repeated,  hk  1917,  five  Tax  Budget 
BuUeHfU  were  prepared  by  Comptroller  PrendeiSMit  for  pq^Nikr  CMummptlon,  but 
thii  oqjiefimait  also  was  not  attempted  agaiiL 


Financial  Administration:  Expenditures  67 


seen  that  there  are  some  serious  omissions.  It  will  be  seen  also 
that  there  is  a  mass  of  repetitious  and  unnecessary  printing, 
even  thoug}i  much  of  the  matter  is  kept  in  type  throu^  succeed- 
ing stages.  Without  increasing  the  costs  of  preparation  or  of 
publication/  provisions  could  easily  be  made  for  a  real  budget. 

In  other  words,  the  budget  document  should  be  a  summary 
statement,  showing  the  complete  eiq>eiiditure  requiremrats  of  the 
city,  borough  and  county  governments,  and  the  means  of  financing 
these  requirements.  The  statement  should  show  the  expenditures 
of  the  operating  imits  of  the  city  government  for  the  previous 
year.  Such  a  summary  statement  should  then  be  supported  by  a 
number  of  detailed  schedules  showing  the  distribution  of  expendi- 
tures by  funds,  organization  units,  and  objects.  Such  a  budget 
should  be  widely  distributed.  It  would  attract  public  attention, 
and  greater  scrutiny  could  be  given  to  the  dty's  fitiAi^^iM  prob- 
lems. 

The  Appropriation  Ordinance 

As  an  appropriation  ordinance,  the  New  York  City  budget  is  on 
the  whole  minutely  detailed.  But  in  this  respect  it  is  not  com- 
pletely consistent.  Thus  the  1927  budget  contains  such  items  as 
the  following: 

Code  3040,  Board  of  Transportation,  $5,000,000;  code  3068, 
readjustment  of  salaries,  $1,000,000;  code  3069,  equalization  of 
wage  rates,  $1,500,000;  code  3071,  repaving,  $7,000,000;  code 
2985,  printing,  stationery  and  blank  books,  and  publication  of 
CUu  Record,  $1,472,000. 

No  information  is  given  as  to  precisely  how  these  large  smns 
are  to  be  distributed.  Some  county  offices  insist  that  since  their 
appropriation  is  mandatory  they  are  under  no  obligation  to 
furnish  the  Board  of  Estiniate  with  adequate  iiifonnation.  Th&ce 

*  The  present  budget  documents  cost  more  than  $75,000  a  year  to  piint.  Mudi 
valuable  information  was  formerly  contained  in  the  Financial  Summary  prepared 
by  the  Division  of  Accountancy  of  the  Department  of  Finance.  The  pubUcation  of 
this  document,  which  appeared  more  than  a  year  after  the  financial  transactions 
with  which  it  dealt,  was  abandoned  under  Comptroller  Craig  in  1921.  The  proper 
tone  for  the  publication  of  mnnh  a  mimmary,  however  is  in  August  or  S^tember 
wbm  the  budget  doemneBt  is  being  prepared. 


68  New  Yobx  Citt's  Finangbs  and 


are  also  large  lump  sums  appropriated  for  various  public  and 
quasi-public  educational  corporations  with  which  the  city  has 
contracts.^ 

All  departmental  appropriations,  irreiEpectiye  of  their  purpose 

or  whether  they  be  mandatory  or  discretionary,  should,  as  long 
as  the  existing  appropriating  system  remains,  be  accompanied  by  a 
schedule  showing  in  some  detail  the  manner  in  which  it  is  proposed 
to  sp^d  the  mon^.  The  present  lump  sum  iqypropriations 
throw  little  or  no  light  on  the  manner  in  which  the  money  will  be 
spent.   Experience  has  shown  that  these  limip  sum  appropna- 

1  The  relation  of  the  city  to  the  quasi-pubhc  educational  agencies  to  which  it 
appropriates  money,  needs  some  darific»tkm  and  standaidiiation,  partieolaily  in 
the  matter  of  budgetaiy  oontioL  Certain  of  tbese  ocnporations  leoeiye  huge  himp 
sums  which  are  accompanied  by  no  operating  schedules. 

The  f (blowing  table  from  the  1927  budget  ilhistiates  the  eonfusioa  in  tbis  matter : 


Luitp  Sum  AppBOPRiAnoim 

Code 

1070      Salaries  and  Expenses.  New  York  Public  Library   $1,413,315.00 

1186,  7  New  York  Public  Library,  Building  Maintenance  and  Bcpain   87,500.00 

1080     Brooklyn  Public  Library,  Salaries  and  Expenses   787,270.00 

1260      New  York  Botanical  Garden,  Salaries  and  Expenses   230,000.00 

1000     College  of  City  of  New  York.  Personal  Service   1.488,695.90 

UBS     Hmter  CoUece  of  Oty  of  N«w  Yofk: 

Tax  levy  allowance   1,218,155.24 

Estimated  fees   96,000.00 

Befwmal  SenriM   $8,190,086.24 

(Note:  Appropriations  for  City  and  Hunter  Colleges  for  other  than  personal  servifl%  MMMttAias  to 
$168,067  and  $157,850  i«epeotively»  wwe  made  on  the  bem  of  itemised  eetimafcee.) 

1100-3     Metropolitan  Museum  <A  Art: 

Tax  levy  allowance  ••••••••  $420,950.00 

MweomV^Kb  ••  $88,879.75 


Departmental  total   $809,522.76 

120&»  8     Ametieeii  Museum  of  Natml  Wtkam 

Tte  IcAry  allowaiiee  •••••  410,375.00 

Museum  Funds   122.583.00 


Departmental  total   $532,958.00 

1105-200  New  York  Zoological  Society.  New  York  Aquarium,  Departmental  total    .  65,228.00 

Brookbm  Institute  of  Arte  and  Bcienew 

1340,  41    Central  Museum,  Department  total  •••••••  218,312.00 

1350,  51    Children's  Museum.  Departmental  total  23,380.00 

IMfKOl   BetaiiieGanleB,De|MrtaMiitatotil   87,048X10 


These  agencies  are  essentially  similar  in  their  relations  to  the  city.  Practically 
all  of  them  have  private  funds  which  are  in  no  sense  city  moneys.  The  Museum  of 
Natural  History  and  the  Metropolitan  Museum  of  Art  include  in  thdr  schedules 
eortain  ezpendituras  to  be  met  in  part  from  Museum  fuiMb  amounting  to  $122,583, 
and  $388,572  req3ectivd[y.  There  seems  to  be  no  good  reason  why  the  other 
oiganisations  receiving  large  donations  from  the  city  should  not  submit  some  Idiid 
of  work  foogramme  or  schedule  in  connection  with  their  requests. 


Financial  Administration:  Expbnditubbs  69 


tions  increase  more  rapidly  than  do  scheduled  appropriations. 
Moreover,  a  lump  sum  appropriation  operates  at  present  to  give  a 
department  all  accruals  within  the  sum  which  may  be  ea^mded 
without  any  supervision  from  the  Board  of  Estimate. 

Apart  from  the  lump  sum  appropriations  just  mentioned,  most 
of  which  are  quite  recent,  the  city  budget  is  minutely  detailed. 
It  contams  3804  codes.  Many  of  tiiese  codes  are  subdivided  into 
twenty  lines  or  more,  each  apparently  canying  an  appropriation. 
The  Board  of  Estimate  takes  the  attitude  that  the  code  only  is  the 
appropriation,  and  modifies  the  lines  or  schedules  freely.  There 
may  be  some  doubt  as  to  the  legality  of  this  practice.^  Strictly 
speaking,  the  Board  erf  Estimate  is  permitted  to  transfer  money 
from  any  appropriation  to  any  other  appropriation,  but  it  is  not 
permitted  to  introduce  a  new  appropriation  into  the  budget. 
In  the  adding  of  lines  to  codes  the  Board  comes  close  to  doing  this. 

The  budgets  (appropriation  ordinances)  for  1918,  1919,  and 
1920  were  prepared  in  a  somewhat  different  form  from  those  of 
other  years.  The  totals  appropriated  for  salaries,  equipment, 
supplies,  etc.,  were  separated  and  included  in  the  first  part  of  the 
volume  in  the  form  of  an  apfxropriation  act.  The  second  part  of 
the  volume  contained  the  supporting  schedules  in  complete 
detail.  This  form  was  abandoned  in  the  1921  budget,  and  the 
completely  itemized  budget  was  retiu:ned  to.  In  1925,  the  Board 
prepared  to  adopt  the  budget  in  the  earlier  form  of  an  appropria- 
tion and  supporting  schedules,  but  at  the  last  moment  objection 
was  made  and  the  entire  document  was  enacted,  though  in  form 
the  departmental  summaries  and  the  schedules  are  separated. 
Later  budgets  have  reverted  to  the  old  form. 

IV.  Capital  Pbog&amme  and  Coepo&ate  Stock  Budget 

The  municipal  budget,  as  has  been  said,  should  not  deal  solely 
with  the  receipts  and  expenditures  of  a  single  fiscal  year.  It  is 
essential  to  see  the  budget's  figures  in  the  light  of  past  experience. 
It  is  essential  also  that  a  budget  be  prepared  in  the  li^t  <rf  the 
city's  future  needs. 

Charter,  Seetioii  237. 


70 


New  York  City's  Finances  and 


An  innocent-looking  appropriation  of  $500,000,  say,  may  be  for 
tiie  pidiminaiy  work  on  an  improvement  that  may  require 
$5,000,000  before  it  is  completed.  A  municipal  budget  8lu>uld 
indicate  that  more  than  the  $500,000  will  be  necessary.  A  citizen 
desiring  to  know  the  significance  of  such  an  item  should  not  be 
forced  to  make  extended  researches  in  order  to  discover  its  impor- 
tance. A  budget,  in  short,  should  show  the  continuity  of  the 
cit3r'8  financial  history  to  the  extent  that  this  is  possible.  The 
informational  budget  should  earmark  appropriations  which  will 
require  future  capital  expenditures.  Estimates  of  the  probable 
total  costs  should  be  made  and  noted.  Figures  should  begiveOi 
at  the  time  the  bill  is  prepared,  of  probable  requirements  on 
future  dates  for  the  capital  costs  of  projects  under  way. 

Borrowing  Procedure 

The  procedure  now  followed  in  the  authorization  of  capital 
expenditures  and  the  raising  of  loan  funds  is  briefly  as  follows: 
The  various  departments  of  the  city  ^  submit  to  the  Board  of 
Estimate,  at  various  times  during  the  year,  and  particularly  in 
December,  their  requests  for  given  amounts  of  Corporate  Stock 
or  Tax  Notes  for  the  permanent  improvements  which  they  desire. 
These  items  are  placed  either  on  the  current  calendar  or  else  on 
a  epecial  annual  calendar  printed  early  each  year.  As  the  new 
items  are  added,  the  calendar  is  revised  or  supplements  to  it  are 
prepared.  Items  are  picked  from  the  calendar  and  acted  on  by 
the  Board  from  time  to  time  during  the  year.  No  special  order 
is  followed  in  the  consideration  of  the  items,  nor  is  the  attempt 
made  to  formulate  a  programme  or  budget  of  capital  e9q)endi- 
tures  for  the  year.'  Some  items  appearing  on  the  calendar  are 
never  considered.  Others  are  considered  only  in  a  modified 
form.  The  departments  may  revise  their  requests  upward  or 
downward  or  substitute  new  items  for  old.  Authorizations  are 
thus  made  in  a  piecemeal  fashion,  and  not  at  one  time  as  with 
tax  budget  expenditures. 

The  authorization  by  the  Board  of  Estimate  is  final  in  the  case 

^The  MilHsiy  Law  proyides  a  spedal  {Hooediire  for  the  Amioiy  Board. 
*BoiBm  yeais  a^o  su^  an  attenD|)i  was  made,  bul  it  wtm  fopii  ibiajgii^ 


Financial  Admxnistration:  Expenditures  71 


of  corporate  stock  for  new  water  supply,  transit,  and  school 
purposes,  for  water  distribution  (up  to  $2,000,000),  for  dock 
purposes  (up  to  $5,000,000),  and  for  certain  i^iecial  purposes 
epecified  in  Section  169  of  the  Charter.  The  Board  has  final 
authority  in  issuing  Serial  Bonds,  Tax  Notes,  and  Assessment 
Bonds.  In  the  few  remaining  instances,  the  concurrence  of  the 
Board  of  Aldermen  is  required. 

In  no  instance  are  authorizations  of  capital  esqienditures  and 
loans  initiated  in  the  Board  of  Aldermen.  The  Sinking  Fund 
Commission,  however,  initiates  long-term  bonds  for  docks  and 
for  ferries.  The  Dock  Department  and  Department  of  Plant 
and  Structures  submit  such  requests  to  the  Sinking  Fund  Comis- 
sion  and  they  tiien  go  to  the  Board  of  Estimate.^ 

The  city  is  not  required,  as  has  already  been  pointed  out,  to 
issue  bonds  and  have  the  cash  in  hand  before  proceeding  with 
the  execution  of  the  improv^ent.  The  authorization  itself  is 
considered  to  be  an  appropriation  and  equivalent  to  a  provision 
of  funds. 2  Specifications  may  then  be  prepared  and  contracts 
awarded.^  The  obligations  under  these  contracts  are  charged 
against  the  authorizations  of  the  issue  of  bonds  and  are  included 
in  the  computation  of  the  indd[>tedness  <^  the  city  as  '^ocmtract 
liabilities."  *  When  these  obligations  become  payable,  i.e.,  when 
the  bills  are  presented  by  the  contractors,  money  is  secured  by  the 
issuance  of  Corporate  Stock  Notes  which  mature  within  a  period 

^The  requests  of  the  Annoiy  Board  are  also  submitted  to  the  fflwlrfng  fVmd 

Commissioners  whose  decision  is  final.  The  bonds  which  they  authorize,  however, 
are  Special  Revenue  Bonds  as  provided  under  the  Military  Law.  This  is  the  only 
case  in  which  Special  Revenue  Bonds  are  issued  in  the  city  for  capital  improve- 
ments. The  bonds  are  redeemable  from  the  next  year's  taxes  and  are  similar  in  their 
effect  to  the  Tax  Notes. 

*  Under  Section  149  of  the  Charter,  no  contract  other  than  one  payable  from 
■SBCMirjnients  is  yalid  unless  certified  by  the  Comptroller  to  the  effect  that  there  is 
a  balance  of  the  aiqpropriations  or  funds  applicable  thereto  sufficifflit  to  pay  the 
estimated  expense  of  executing  such  contract. 

*  In  a  few  cases  the  city  is  its  own  contractor  and  does  the  work  by  departmental 
labor.  The  procedure  in  these  cases  is  somewhat  similar  to  the  one  described  below, 
except  that  no  contract  liabilities  in  these  cases  are  entered. 

*  The  obligations  under  the  acquisitions  of  land  are  charged  against  the  indebted- 
ness only  after  title  in  the  land  has  been  vested  in  ibe  city.  The  cost  of  the  land 
is  estimated  on  the  basis  of  its  assessed  valufttkm.   Interest  on  the  estimftted  Vlihw 


72  Nsw  YoBK  Ccnr's  Finangib  ahd 


not  to  exceed  one  year.  These,  in  tunii  are  oonvia-ted  into  long 
term  stock. 

The  entire  procedure  of  authorizing  capital  expenditures  and 
bond  issues,  other  than  those  involving  the  aoquisition  (rf  land, 
may  be  summarized  as  follows:  (1)  requests  by  departments 
made  to  the  Board  of  Estimate  either  directly  or  indirectly; 
(2)  authorizations  by  the  Board  of  Estimate  alone,  or  with  the 
concurrence  of  the  Board  of  Aldermen;  (3)  awards  of  contracts 
and  the  incurrence  of  ''contract  liabilities"  tihereunder;  (4)  issu- 
ance of  corporate  stock  notes  in  liquidation  of  these  obligations, 
and  (5)  conversion  of  these  notes  into  long  term  bonds. 

A  somewhat  different  procedure  is  followed  for  the  acquisition 
<d  land.  The  department  needing  a  particular  improvement 
usually  selects  the  site  and  requests  the  Board  of  Estimate  and 
Apportionment  to  acquire  it.  In  some  cases — e.g,y  libraries, 
court  houses,  and  incinerators — the  Board  of  Aldermen  approves 
the  sdection  and  the  Board  of  Estimate  then  concurs.  Sites 
for  docks,  ferry  slips,  and  water  front  improvement  are  con- 
sidered by  the  Sinking  Fimd  Commissioners  before  they  go  to 
the  Board  of  Estimate.  The  Charter  has  various  provisions 
for  the  filing  of  plans  and  the  holding  of  Hft«.ring^  on  proposed 
acquisitions  before  final  action  is  taken. 

Every  resolution  passed  by  the  Board  of  Estimate  authorizing 
the  acquisition  of  a  given  site  contains  a  clause  permitting  the 
Comptroller  to  piurchase  the  property  at  a  private  sale  as  an 
alternative  to  condannation.  Owners  of  property,  however, 
invariably  prefer  to  have  the  property  condemned.  The  con- 
demnation proceedings  are  conducted  through  the  Corporation 
Counsel.  The  city  apphes  to  the  court  for  an  order  for  the 
condemnation  of  the  property.  When  such  an  order  is  obtained, 
the  Board  of  Estimate  may,  by  resolution,  vest  title  to  the 
property  in  the  city.  Thereupon  the  department  can  enter  on 
the  property  and  use  it  for  the  purpose  for  which  it  has  been 
acquired.  The  acquisition  of  land  usually  takes  place  without 
previous  appropriation  or  authorization  of  the  issue  of  bonds  to 
cover  the  probable  costs.  The  city's  liability  on  account  of  the 
acquisition  is  recognized  from  the  time  the  title  of  the  land  is 


Financial  Administration:  ExFENDrruBisa  73 

vested  in  the  city.  It  is  put  down,  for  the  purpose  of  calculating 
the  debt  limit,  at  the  amount  at  which  the  property  is  assessed, 
and  is  charged  at  that  figure  to  the  account  entitled  '^land 
liability."  Interest  at  six  per  cent,  is  added  annually  until  the 
liability  is  discharged. 

The  award  is  usually  higher  than  the  amoimt  at  which  the 
property  was  assessed  at  the  tune  of  its  acquisition.  The  city 
frequently  under-assesses  vacant  land.  Courts  and  c(Hid«niiation 
commissioners  seem  inclined  to  treat  the  owners  of  property 
generously.  Finally,  the  award  includes  interest  at  six  per  cent, 
from  the  date  of  vesting  the  title,  and  this  additional  sum,  where 
the  proceedings  extend  over  a  period  of  several  years,  may  be 
considerable.  Comptroller  Berry  in  a  recent  statement  cited  five 
instances  of  school  sites  recently  acquired  in  which  the  award 
was  four  or  five  times  greater  than  the  assessed  valuation  of  the 
property.^  According  to  the  testimony  of  the  real  estate  experts 
of  the  dty,  the  sites  for  the  Staten  Island  piers  were  worth 
$1,300,000,  but  the  Supreme  Court  rendered  an  award  of 
$8,500,000,  which  is  now  being  appealed  from  by  the  city.  A 
brief  submitted  by  the  Corporation  Counsel  cites  many  instances 
of  purported  errors  on  the  part  of  courts  which  have  fixed  the 
costs  of  certain  parcels  of  land  at  several  times  their  real  values.* 

After  an  award  is  made,  the  Board  of  Estimate  authorizes  the 
necessary  amount  of  bonds.  Corporate  Stock  Notes  are  then 
issued  to  be  converted  later  into  long-tmn  bonds. 

This  procedure  permits  long  delays  between  the  date  of  ac- 
quiring the  land  and  the  date  of  the  award.  Schools  may  be 
erected  or  the  land  otherwise  used  with  no  financial  provision 
for  the  eventual  payment  of  costs.  The  site  for  Bronx  T^minal 
Market  was  acquired  in  1922.  An  authorization  to  pay  for  the 
land  was  made  in  April,  1927,  when  an  award  of  approximately 
seven  and  one-half  million  dollars  for  that  site  was  rendered. 
The  title  to  the  sites  for  the  Staten  Island  piers  was  vested  in 
the  dty  in  October,  191d.  The  toitative  award  was  rendered 

&  New  Ywk  Times,  July  13, 1927. 

*  In  the  matter  of  the  condemnation  of  the  properties  of  Stfttea  Tdand,  Sufmnie 
Court,  ApfwUate  Diviaioii,  Seoond  Judicial  DqMurtmcnt. 


74 


New  York  City's  Finances  and 


by  the  court  in  1922.  The  city  appealed  the  case.  In  August, 
1927,  the  award  was  not  yet  final  and  no  pfovisbn  for  payment 
had  be^  made. 

Interest  ^liiich  accrues  on  the  purchase  price  from  the  time 
title  was  vested  in  the  city  to  the  time  the  award  is  actually 
paid,  is  made  a  part  of  the  capital  costs  and  is  included  in  the 
amount  for  which  bonds  are  ismied.  Thus,  part  of  the  pitH 
ceeds  of  forty-  or  fifty-year  bonds  are  used  to  pay  interest  accruing 
for  two,  three,  four,  or  five  years.  In  the  case  of  the  Staten 
Island  piers  the  interest  will  accrue  for  eight  years  and  will 
amount  to  forty  per  cent,  or  more  of  the  purdbaee  price,  t.e., 
betwe^  two  and  three  million  dollars. 

Under  the  procedure  described,  furthermore,  the  Board  of 
Estimate  passes  resolutions  vesting  title  in  the  city,  in  ignorance 
of  the  prices  that  may  be  fixed  by  the  courts.  The  Board  may 
thmfore  unwittingly  acquire  prop^y  on  which  the  courts  fix 
unduly  high  priees.^  Having  once  secured  title  to  property,  the 
dty  cannot  withdraw  from  the  proceedings.  It  must  go  through 
with  its  part  of  the  bargain.  The  situation  might  be  improved 
if,  before  the  first  award  had  been  oonfim^  by  the  court,  and 
when  title  to  the  property  had  not  yet  vested  in  the  city,  the 
Corporation  Counsel  would  advise  the  Board  of  Estimate  of  the 
amount  of  the  tentative  award  and  of  the  amounts  at  which 
the  property  had  been  assessed  at  the  time  of  its  selection  and 
at  the  time  of  the  tentative  award.  The  Board  would  then  be 
in  a  position  to  determine  whether  to  take  title  to  the  land  or 
to  withdraw  from  the  proceedings. 

Financial  Planning 

There  is,  however,  another  aspect  of  the  matter,  namely, 
financial  planning.  If  it  is  possible,  it  is  desirable  that  a  dty 
diould  prepare  a  financial  programme  covering  five  or  ten  years. 
Such  a  programme  should  set  forth  the  expenditures  that  would 
be  necessary  year  by  year  by  reason  of  the  normal  growth  of 
the  city's  activities.    The  programme  would  disdose  the  e]q)endi- 

*  Before  rendering  the  final  award  the  oouit  usually  fixes  a  tentative  figure  whieh 
shows  the  court's  drift  of  thought,  and  counsel  on  both  sides  may  then  pioeeed  with 
their  final  aiguments  that  this  figure  is  too  high  or  too  low. 


FiNANciAii  AnMiNisTaATioN:  ExFiMnmTBiiS  75 


tures  for  permanent  improvements  which  are  contemplated,  and 
would  indicate  the  methods  by  which  all  expenditures  would  be 
financed.  Few  cities  have  ever  prepared  such  a  comprehensive 
programme.  The  difficulties  involved  are  great.  The  demands 
of  different  departments  have  to  be  sorted  over  and  pared  down, 
and  that  is  a  task  that  public  officials  rarely  care  to  undertake  in 
the  absence  of  charter  requirements  or  immediate  emergencies. 

In  1919  a  comprehensive  five-year  financial  programme  was 
prepared  for  Newark,  N.  J.  The  programme,  however,  was  not 
adhered  to  by  the  city  authorities.  In  1925  a  ten-year  financial 
programme  was  prepared  for  Detroit  under  the  auspices  of  a 
Citizens'  Committee.  The  Committee  projected  into  the  future 
the  city's  capacity  to  pay  as  well  as  the  city's  needs.  Financial 
programmes  in  respect  of  permanent  improvements  only  have 
been  prepared  for  Bluefield,  W.  Va.,  and  Kalamazoo,  Mich. 
Such  planning  enables  a  city  to  decide  more  inteUigently  upon 
the  projects  that  it  will  undertake  than  when  the  sifting  of  capital 
demands  is  left  to  a  series  of  special  sessions  of  the  appropriating 
authorities.  A  comprehensive  plan  will  undoubtedly  insure 
greater  economies.  It  will  keep  steadily  before  the  city  officials 
the  fact  that  a  particular  programme  will  require  at  given  dates 
tax  levies  which  are  known  in  advance. 

There  will  be  found  in  the  Appendix  ^  a  separate  memoran- 
dum outlining  same  of  the  capital  outlays  which  New  York  City 
contemplates  for  the  immediate  future.  This  memorandum 
shows  how  difficult  would  be  the  task  of  preparing  a  comprehensive 
financial  programme  for  New  York  City,  and  of  having  a  capital 
stock  budget  adopted  annually,  synchronously  with  the  adoption 
of  the  regular  appropriation  budget.  Any  comiH:ehensive  i»o- 
gramme  could  be  prepared  only  after  long  study  participated  in  by 
engineers,  statisticians,  and  specialists  on  city  planning.  Five 
months  of  continuous  work  were  required  for  Detroit,  and  De- 
troit's problems  are  relatively  simple  in  comparison  with  those  ot 
New  York. 


^  See  p.  279. 


CHAPTEE  in 


NEW  YORK  CITY'S  EXPENDITURES  FOR  SALARIES 

Fifty  per  cent,  of  New  York  City's  budget  of  $500,000,000  is 
spent  on  personal  service.  The  mere  size  of  this  item  indicates 
its  tremendous  importance.   The  m^ods  used  to  fix  the 


HI}  1 1 


PI 

1 

The  pages  that  follow  attempt  to  answer  such  questions  as 
these:  How  many  employees  are  on  the  payrolls  of  the  city ?  How 
are  their  wages  and  salaries  fixed?  Who  determineB  what  shall 
be  paid  for  a  given  type  of  work?  Is  the  same  rate  of  pay  provided 
for  the  same  kind  of  work  in  different  departments  or  in  the 
various  boroughs?  Are  salaries  fixed  on  an  individual  basis  or 
on  the  basis  of  a  (systematic  classified  scheme?  Are  dty  em- 
ployees underpaid  or  overpaid?  Have  salary  and  wage  increases 
kept  pace  with  the  cost  of  living?  All  of  these  matters  have  a 
definite  and  import^it  bearing  upon  the  budget  and  finances 
of  the  city  government. 

One  problem,  however,  does  not  lend  itself  to  treatment  on 
the  basis  of  proper  methods  of  classification  and  the  adjustment 
of  salaries  to  the  cost  of  living.  This  problem  relates  to  the  com- 
pensation of  highly  placed  officials.  The  recent  resignation  <rf 
Pdice  Commissioner  McLau^ilin  has  again  called  attention  to 
the  fact  that  New  York  City  hopes  to  secure  for  $10,000  a  year 
abilities  which  can  command  several  times  as  much  in  private 
business.  The  Corporation  Counsel,  similarly,  is  paid  $15,000. 
He  is  pitted  against  lawyers  who  feoeive  much  more  than  that 
fix)m  a  single  one  of  their  numerous  clients.  Municipal  corpora- 
tions can  probably  not  compete  with  private  corporations  in 

7« 


Financial  ADioNismATioN:  Salabibs  77 

• 

bidding  for  personal  services,  but  the  question  arises  as  to  whether 
existing  divergencies  are  not  too  great.  In  any  event,  a  discussion 
of  the  salary  problem  should  not  fail  to  include  a  consideration  of 
the  compensation  of  the  heads  of  city  departm^ts. 

It  is  even  more  important  that  account  be  taken  of  the  status 
of  those  permanent,  highly  placed  employees  (under  civil  service) 
whose  work  if  done  with  similar  success  and  fideUty  for  private 
corporations,  would  be  much  more  remunerative.  This  matter 
has  been  almost  entirely  overiooked  in  past  discussions  of  munici- 
pal salaries.  It  is,  of  course,  a  difficult  question  in  values.  The 
rule  that  stenographers  and  policemen  must  receive  something 
more  than  a  living  wage  may  serve  as  a  rough  and  ready  deters 
mination  of  their  beginning  wage  scales.  But  in  the  city's  service 
are  technically  trained  persons,  such  as,  for  example,  the  accoun- 
tants in  the  Department  of  Finance,  the  examiners  for  the  Board 
of  Estimate  and  Apportionment  and  for  the  Municipal  Civil 
Service  Commission,  and  many  engineers.  Most  of  these  officials 
are  underpaid.  Recent  increases  in  salary  levels,  discussed  in  the 
following  pages,  have  largely  ignored  the  compensation  of  such 
permanent  officials.  Their  stipends  have  not  been  increased  in 
the  same  proportions  as  have  the  wages  of  less  skilled  employees. 
Yet  on  the  ability  of  the  city  to  attract  into  and  retain  in  its 
service  specialists  of  various  kinds,  depends,  as  has  been  said, 
the  efficiency  of  the  city's  govemmi^tb  In  respect  of  such  officials 
a  haphazard  and  political  adjustment  of  salaries  has  more  griev- 
ous effects  than  in  respect  of  unskilled  workers. 

What  follows  should  be  read,  therefore,  with  this  general  con- 
sideration in  mind:  that  the  salaries  for  the  higher  posts  in  the 
city  administration  are  in  more  important  need  of  equitable  ad- 
justment, and  adjustment  upward,  than  are  salaries  for  unskilled 
workers. 

Tlw  Sue  of  Personal  Service  Appropriations 

There  are  at  present  about  75,000  permanent  civil  service 
employees  carried  on  the  city's  payrolls.  To  this  number  should 
be  added  38,000  teachers  in  the  Department  of  Education,  mak- 
ing a  total  of  113,000  municipal  employees.  The  distributiim  of 


78 


Nkw  Yobk  Citt's  Finangss  and 


these  workers  among  the  larger  departmeiits  is  shown  in  the 
following  table. 

TABLE  I 

Departments  with  Mobb  Than  1,000  EmitOTSBS  ^ 

NmmB  or  Emploi 


Department 

Department  of  Education  .... 

Police  Department  

Borough  Presidents  

Departen^t  of  Street  Qeaning     .  . 

Fire  Department  

Department  of  Public  Welfare  .  .  . 
Department  of  Plant  and  Structures  . 

Department  of  Health  

Department  of  Water,  Gas,  and  Mectricity 

Department  of  Parks  

Bdleviie  and  Alfied  Hosftttak  .  .  . 
Board  ctf  Transportation  .... 


40,152 
14,970 
10,807 
7,857 
7,029 

3,774 
3,199 
2,785 
2,524 
2,275 
1,034 


Teachers  form  the  largest  single  group  found  in  any  depart- 
ment. Of  the  other  civil  service  employees  the  patrolmen  aie 
most  numerous,  with  street  cleaners  and  firemen  next  in  order. 

Clerical  and  office  workers  constitute  a  very  large  group,  but 
statistics  regarding  their  number  are  not  available. 

Half  of  the  Budget  Expended  for  Salaries 

The  Budget  for  1927  totals  $474,893,300 of  which  $231,579,060  is 
for  personal  service,  including  teachers'  salaries.  Expenditures 
for  salaries  and  wages  of  civil  service  employees  have  increased 
enormously  in  recent  years  as  will  be  seen  £r^  the  table  on 
page  79. 

The  budget  of  the  city  increased  146  per  cent,  during  this 
period  as  compared  with  an  increase  of  167  per  cent,  for  sala- 
ries of  civil  service  employees.  During  this  time  the  popula- 
tion of  the  city  increased  approximatdy  27  per  cent.  The  num- 
ber of  employees  has  increased  35  per  cent.  Personal  service 
costs,  exclusive  of  teachers'  salaries,  increased  from  $12  per 
capita  in  1913  to  about  $25  in  1927.  In  1913,  1.08  per  cent,  of 
the  city's  population  was  oh  its  payroll;  in  1926,  1.13  per  emt. 
The  mere  size  of  personal  service  expenditures  suggests  the  need 

*The  figures  used  in  this  table  are  taken  from  the  pamphlet  on  the  organization 
of  the  city  government,  published  by  the  National  Institute  of  Public  Administra- 
tkMi,  in  1026. 


Financial  Adionibxbation:  Salabies 


79 


table  n 

Increase  in  Cost  of  Pbbsonal  Service,  1913-1927 


55,374 
55,570 

54,586 

53,027 

50,0001 

54,129 

52,468 

54,674 

57,648 

60,451 

62,535 

66,378 

70,658 

73,0001 

75,000  » 


$50,989,690 
61,384,750 

62,323,048 
61,516,910 
64,642,304 
67,889,518 
71,929,224 
87,719,079 
104,517,460 
110,745,367 
115,858,812 
123,072,690 
134,645,661 
141,720,670 
160,383,926 


*  Approximate. 

Note:  The  nuiiiba*  of  employees  shown  is  taken  from  the  reports  of  the  Civil 
Servioe  Gommission,  and  the  appropriatioiis  from  the  annual  budgets,  l^aeh^ 

temporary  laborers,  and  the  employees  of  quasi-public  museums  and  other  institu- 
tions not  under  civil  service,  and  the  salanes  paid  these  groiqMBy  are  not  eoosideied 
in  the  foregoing  table. 

for  a  very  careful  expenditure  control,  for  a  compidbensive  em- 
ployment policy,  and  an  adequate  "hiring  and  firing"  process. 

The  Municipal  Civil  Service  Commission,  which  is  charged 
with  the  supervision  of  the  city's  employees  with  the  exception  of 
the  teachmg  force,  is  created  by  the  state  civil  service  law.»  It 
has  three  members,  appointed  by  the  Mayor.  An  entirely 
separate  Board  of  Examiners  of  seven  members  supervises  the 
employment  of  the  teaching  force  of  the  Department  of  Education. 

The  state  law  authorizes  the  local  Conmiission  to  divide  the 
service  into  the  exempt  class,  the  competitive  class,  the  non- 
competitive class,  and  the  labor  class,  and  further  to  classify 
and  grade  positions.  It  confers  authority  on  the  municipal 
commission  to  establish  rules  and  regulations,  subject  to  the 
approval  of  the  state  commission,  and  otherwise  to  administer 
the  employment  processes  of  the  city. 

^  Laws  of  1909  Chap.  15,  as  amended. 


80 


Nbw  Yobk  City's  Financ»&  and 


Haw  Sakariea  are  Fixed 

Jurisdiction  ov^  rates  of  pay  is  placed  by  the  city  Charter  in 
the  Board  of  Aldermen  and  the  Board  of  Estimate.  The  Charter 
provides  that  "the  salaries  and  wages  of  all  such  officers,  clerks, 
employees,  laborers,  and  subordinates  in  every  department  shall 
be  such  as  shall  be  fixed  by  the  Board  of  Aldermen  upon  the 
reoommfiDdation  of  the  Board  of  Estimate  and  Apportionment.'^  ^ 
Another  section  of  the  Charter  states  that  the  Board  of  Estimate 
shall  "fix  the  salary  of  every  officer  or  person"  by  ordinance  or 
resolution.  The  nimibers  of  employees  authorized  for  each 
d^>artmenty  with  few  exceptions^  are  indicated  in  detail  in  the 
annual  budget  togethw  with  the  rates  of  pay.  Because  of  the 
charter  provisions  calling  for  the  "fixation"  of  salaries  authoriza- 
tion in  the  budget  has  not  been  deemed  sufficient,  so  that  special 
lesdutions  designating  tt^  number  of  positions  and  rates  of  pay 
for  certain  types  of  employment  in  specified  departments  are 
passed  from  time  to  time  by  the  Board  of  Aldermen  upon  recom- 
mendation of  the  Board  of  Estimate.  These  resolutions  which 
usually  deal  with  single  positions  or  small  groups  of  positions, 
without  reference  to  other  poritions  of  a  comparable  nature, 
have  been  largely  responsible  in  recent  years  for  causing  in- 
equalities in  compensation.' 

The  "fixation"  of  salaries  is  in  most  cases  in  the  hands  of  the 
Board  of  Aldermen  upon  the  recommendation  of  the  Board  of 
Estimate.  Salaries  of  Bronx  County  employees,  however,  are 
fixed  by  the  Board  of  Estimate  alone;  Surrogate  Court  salaries 
are  determined  by  the  Board  of  Aldermen  acting  alone,  and  the 
salaries  of  oi&L&t  court  emplo3reeB  are  usually  fixed  by  the  judges. 
Pixjvision  is  made  for  emergency  temporary  and  provisional  ap- 
pointments for  four  months.  These  employees  may  not  be  re- 
appointed without  civil  service  qualifications.  A  recent  investi- 
gation revealed  that  there  are  now  on  the  payrolls  1,500  such 
employees,  some  of  whom  have  hdd  thdr  temporary  appoint- 
ments for  years. 

Apart  from  the  special  minimum  rates  for  institutional  em- 

i  Charter,  Section  56.         *  See  below,  p.  91. 


Financial  AD]iiNiBi!BA*r[ON:  SaiiArtbs 


81 


ployees,  the  Board  of  Estimate  requires  all  vacancies,  with  a 
few  specified  exceptions,  to  be  filled  in  accordance  with  a  table  of 
rates  which  it  includes  in  the  annual  Terms  and  Condiiions,  of 
the  BudffeL  Since  1921  each  year's  Budget  has  contained  the 
fdlowing  provisions: 

3.  (a)  All  other  vacancies  may  be  filled  in  the  discretion  of 
the  department  head  at  one  of  the  following  rates;  the  particu- 
lar rate  in  each  case  being  the  one  next  lower  than  the  schedule 
line  rate  unless  the  schedule  line  rate  is  one  of  the  rates  enumer- 
ated below,  in  which  case  the  vacancy  may  be  filled  at  the 
schedule  line  rate,  and  provided  that  in  departments  under 
the  jurisdiction  of  the  Mayor  the  approval  of  the  Mayor  shall 
first  have  been  obtained: 

Positions  Governed  by  the  Municipal  Positions  Governed  by  the  Staxb 
Civil  Service  Rules  Civil  Service  Rules 


Rates  of  Compensation 
(With  and  without  Maintenanoe) 

$760.00  $760.00 
960.00  901.00 
1,260.00  1,201.00 
1,560.00  1,501.00 
1,860.00  1,621.00 
2,160.00  1,801.00 
2,460.00  2,101.00 
2,760.00  2,401.00 
3,000.00  2,641.00 
3,500.00  2,701.00 
4,000.00  3,001.00 
4,500.00  3,500.00 
5,000.00  4,000.00 
5,500.00  4,500.00 
6,000.00  5,000.00 

5,500.00 
6,000.00 

Steps  Involved  in  Appointing  an  Employee 

A  department  head  demring  to  add  new  employees  to  his  pay- 
roll applies  to  the  Board  of  Estimate  which  sends  out  an  examiner 
to  ascertain  the  work  involved,  the  number  of  positions  needed, 
and  the  titles  to  be  assigned  them.  The  examiner  then  sends  a 
report  to  the  Budget  Director  who  endorses  thereon  his  recom- 
mendation  and  transmits  it  to  the  Board  of  Estimate.  If  the 
matter  is  approved  by  the  Board  of  Estimate  and  Board  of 
Aldermen,  the  department  head  fills  the  position  from  a  list  of 


62 


Nbw  Yobk  Crnr^s  Financbs  aNO 


digibles  who  have  been  duly  examined  and  certified  by  the 
Civil  Service  Commission.  The  Commission  checks  the  depart- 
ment's payrolls  and  certifies  that  no  one  is  employed  without  being 
qualified  under  the  Civil  Service  Law.  The  payroll  is  also  audited 
by  the  Comptroller  who  examines  it  to  see  that  the  positions  and 
salaries  have  been  provided  for  in  the  budget  and  by  resolution, 
and  that  the  funds  are  available. 

The  city  has  no  authority  with  reference  to  the  salaries  paid 
in  the  Department  of  Education,  which  is  authorized  by  state 
law  to  fix  its  own  salaries.  Although  there  are  several  thousand 
clerical  and  custodial  employees  in  that  department  who  are 
recruited  by  the  Civil  Service  Conunission  and  classified  so  far 
as  possible  within  the  general  classification  scheme  of  the  city, 
there  is  not  necessarily  any  coordination  between  their  salaries 
and  those  of  employees  doing  similar  work  elsewhere  in  the  city. 

Clamficatian  of  Posiiians  Entrusted  to  Ciml  Service  Cammieehn 

The  rules  of  the  Civil  Service  Commission  establish  a  classifi- 
cation and  grading  of  the  positions  in  the  city's  service.  The 
present  grouping  of  city  employees  is  as  follows: 

Exempt  Class  (not  subject  to  examination) 

Competitive  Qass:  subdivided  into  the  following  classifica- 
tions: 

The  Ungraded  Service 

The  Cleric^  Service 

The  Engineering  Service 

The  Inspection  Service 

The  Legal  Service 

The  Attendance  Service 

The  Police  Service 

The  Fire  Service 

The  Prison  Service 

The  Street  Cleaning  Service 

Hie  Ferry  Service 

The  Medical  Service 
Non-Competitive  Class 
Labor  Class 


Financial  Administkation:  Salaries 


83 


These  services  are  in  turn  subdivided  into  salary  grades.  Thus, 
the  positions  in  the  clerical  service  are  graded  as  follows:  Grade 
1— $480  to  S959;  Grade  2  — S96(H(1559;  Grade  3  — $1,560 - 
$2, 159 ;  Grade  4  —  $2, 160  -  $2,759 ;  and  Grade  5  —  above  $2,760. 
Whenever  an  employee  is  awarded  a  wage  increase  which  takes 
him  over  the  maximum  for  the  grade,  he  is  required  to  take  a 
promotional  examination,  since  the  state  Civil  Service  Law  has 
been  interpreted  to  require  salary  increases  beyond  the  grade 
limits  to  be  considered  as  promotions. 

The  grades  of  pay  establicdied  by  the  Municipal  Civil  Service 
Commission  have  remained  unchanged  for  ten  years.  They'^wm 
originally  intended  to  be  the  standard  rates  of  compensation  for 
all  city  employees.  They  do  not  now  achieve  that  purpose,  for 
the  Board  of  Estimate  and  Board  of  Aldermen  have  the  power,  as 
indicated  above,  to  establish  the  titles  of  positions  and  the 
salaries  the  incumbents  shall  receive.  The  result  is  that  the  grades 
established  by  the  Civil  Service  Commission  do  not  now  consti- 
tute salary  scales  for  city  employees,  but  serve  only  to  burden  the 
Commission  with  promotion  examinations  whoever  an  employee 
is  raised  from  one  salary  grade  to  another. 

Principles  to  he  Recognized  in  Determining  upon  a  Wage  Policy 

With  the  large  increase  in  the  number  of  governmental  enor 
ployees  in  states  and  cities  in  recent  years,  considerable  atten- 
tion has  been  centered  on  the  necessity  of  classifying  positions 
and  of  equaUzing  rates  of  compensation.  Large  corporations 
have  also  found  it  increasingly  necessary  to  set  up  job  specificar 
tions  and  establish  definite  rates  of  pay.  Definite  standards  in 
governmental  employment  are  the  more  important  because  a 
municipaUty  is  not  subject  to  the  competitive  conditions  pre- 
vailing in  tihe  private  business  field  where  rates  can  frequency 
be  gauged  by  output  or  amount  of  sales.  In  competitive  business, 
personal  characteristics  and  initiative  are  reflected  in  profit  and 
loss  statements;  in  the  public  service,  more  attention  must 
necessarily  be  given  to  the  relative  values  of  different  kinds  of 
work  and  to  g^eral  considerations  of  efficiency. 

Substantially  equal  pay  for  equal  work  has  come  to  be  recog- 


84 


New  York  Cmr's  Finances  and 


nized  as  a  primary  consideration.  ^  Employees  having  similar 
duties,  whether  in  the  same  or  in  different  departments,  should 
receive  equivaleiit  oompensation.  Attention  i^ould  be  given  to 
tiie  rdationship  of  the  rates  paid  groups  of  employees  engaged  on 
different  types  of  work.  Hospital  workers,  for  example,  should 
not  be  markedly  imderpaid  in  comparison  with  office  employees. 

In  datmnining  rates  of  oompensation  for  municipal  em- 
ployees, the  position,  with  its  duties  and  qualification  require- 
ments, rather  than  the  individual,  must  be  dealt  with  if  favoritism 
and  discrimination  are  to  be  avoided.  The  range  or  scale  of  pay 
should  naturally  vary  with  the  type  of  work.  An  employee's 
initiative  and  interest  in  his  work  can  be  recorded  to  a  certain 
extent  by  means  of  rfSdency  ratings  and  merit  may  be  recognized 
by  increasing  compensation  within  certain  limits. 

Cost  of  Living  and  Other  Factors  in  Compensation 

The  compensation  of  various  groups  of  public  employees  should 
be  related  to  the  cost  of  living.  Rates  should  provide  an  adequate 
living  wage.  The  rates,  furthermore,  should  be  fair  in  relation 
to  those  paid  by  the  best  private  employers  for  tl^  same  class 
of  work.  City  employees,  except  in  a  few  departments,  are  not 
subjected  to  the  strain  and  pressure  found  in  competitive  business, 
working  conditions  are  more  pleasant,  tenure  is  more  certain,  and 
a  liberal  ^tem  of  retirement  is  provided.  Other  factors  such  as 
hours  of  work  required,  vacation  and  sick  leave,  working  condi- 
tions, and  opportunities  for  advancement  are  not  to  be  overlooked. 
It  is  apparent  that  these  factors  should  be  substantially  uniform 
tiiroug^out  the  city  service. 

No  conmst^t  wage  policy  can  be  carried  out  unless  definite 
standards  for  appointment  and  service  are  maintained.  There 

1  Tin  Quffter  provides  that  salaries  need  not  be  uniform  throui^ttt  the  several 
boroughs  but  may  be  made  to  reflect  differential  rentals  and  expenses  of  living  in 
the  several  boroughs.  (Charter,  Section  56. )  No  distinction  has,  however,  been  made 
in  recent  years  in  the  salaries  of  employees  in  accordance  with  this  provision.  With 
the  exception  of  rentals,  it  has  been  felt  that  Uving  costs  are  fairly  uniform  through- 
out the  city,  and  it  is  assumed  that  an  employee  of  a  given  type  will  spend  about 
the  same  amount  for  rent  regardless  of  wh^  he  resides. 

National  Industrial  Gonferenoe  Board,  Cost  <tf  lAtvng  in  Nem  York  City, 


FmANCiAL  Adionibtration:  Salabies 


85 


must  be  a  systematic  procedure  in  appropriating  for  salaries  and 
wages.  Rates  must  be  determined  and  periodically  readjusted 
in  conformity  with  a  definite  plan.  The  central  employmmt 
agency,  the  Civil  Service  Commission,  must  be  administered  in 
an  aggressive  and  impartial  manner  in  order  that  favoritism  and 
injustice  may  be  eliminated.  Civil  service  administration  in- 
volves a  clear  and  workable  classification  of  positions  based  on 
an  analysis  of  the  duties  performed. 

The  extent  to  which  the  commonly  accepted  principles  dis- 
cussed in  the  foregoing  paragraphs  are  being  applied  in  the  New 
York  mimicipal  service,  will  be  suggested  in  the  coujrse^of  this 
chapt^. 

Adequacy  of  Salaries  in  Relation  to  Cost  qf  Living 

The  average  salary  of  city  employees  seems  to  have  doubled 
during  the  past  fifteen  years.  Table  III  makes  use  of  the  figures 
contained  in  Table  II,  and  affords  an  approximate  index  <rf  wage 
rates  since  1913.  The  figures  for  average  salary  cannot  be 
precisely  stated  since  sufficient  data  regarding  personal  service 
expenditures  is  not  compiled  by  the  Comptroller.  Budget 
figures — the  amoimt  of  money  appropriated  rather  than  spent 
each  year  for  salaries  and  wages  —  were  utilized.  The  actual 
average  is  probably  somewhat  in  excess  of  the  figures  shown 
since  maintenance  is  provided  for  a  considerable  number  of 
employees.  Others,  such  as  medical  inspectors,  although  per- 
manmt,  are  paid  for  but  a  few  hours'  work  a  day. 

It  will  be  seen  that  from  1916  to  1920,  municipal  salaries 
failed  to  keep  pace  with  the  cost  of  living.  Since  that  time, 
because  of  rather  genius  increases,  salaries  have  approximately 
met  living  costs.  The  1927  budget  appears  to  provide  an  averap:e 
wage  somewhat  larger  than  that  ordinarily  held  to  be  necessary 
to  meet  a  family  budget.  Many  of  the  city  positions  are  of 
types  which  are  customarily  filled  by  unmarried  pmons,  and 
need  not  be  compensated  with  regard  for  the  requirements  of  a 
man  with  a  family.* 


86  Nuw  YoBK  Cmr's  Finances  and 

TABLE  m 


Increase  in  Average  Salary  as  Compabsd  with  lavtSQ  Cobib^ 


Nbw  York  Citt  Cost  ov 

Tbab 

AVERAQB 

Salart 

Living 

Index 

Salary 

June 

December 

1913  

$1,086 

100. 

•  •  •  • 

100. 

1914  

1,104 

101.6 

•  •  •  • 

102.4 

1916  

1,141 

105.0 

•  •  •  • 

104.4 

1916  ...... 

1,160 
1,292 

106.8 

•  •  •  • 

117.7 

1917  

118.9 

•  ■  •  • 

148.2 

1918  

1,254 

115.5 

181.6 

1919  

1,370 

125.9 

183.5 

208.7 

1920   

1,604 

147.7 

224.5 

206.2 

1921  

1,813 

166.9 

186.1 

183.6 

1922   

1,831 
1,852 

168.7 

174.8 

178.4 

1923   

i7a5 

176.7 

181.6 

1924   

1,854 

170.7 

176.6 

180.7 

1925   

1,905 

175.4 

180.0 

187.6 

1926  .   

1,941 

178.7 

182.9 

184.3 

1927   

2,138 

196.8 

•  •  •  • 

•  •  *  • 

The  average  salary  paid  to  teachers  is  $2,412.  Were  teachers' 
salaries  included,  the  average  salary  for  all  municipal  employees 
would  be  about  $2,230. 


Wage  Adjti^menia  During  the  Past  Decade 

During  the  war  the  wage  situation  in  the  city  service  became 
acute.  The  situation  was  partially  relieved  by  various  piecemeal 
increases  but  the  first  general  increase  was  made  m  1919,  when 
$100  additional  was  granted  to  those  receiving  $1,800  per  annum 
or  less. 

The  Budget  for  1920  provided  a  further  general  increase  of 
from  10  to  20  per  cent,  for  employees  receiving  less  than  $2,600. 
The  largest  group  affected  was  that  receiving  less  than  $1,200. 

'  The  cost  of  living  index  numbers  shown  in  the  table  are  thoae  prepared  by  the 

United  States  Bureau  of  Labor  Statistics,  adjusted  to  1914—102.4.  {Labor  Re- 
view, Febniarv,  1027,  p.  173.)  The  so-called  salarv  index  which  affords  a  compari- 
son with  the  changes  in  the  cost  of  living  is  merely  a  percentage  figure  derived  by 
using  the  average  salary  for  1913  as  a  base.  Average  salaries  shown  are  approxi- 
mate figures  obtained  by  dividing  annual  personal  service  appropriations  by  the 
miBiber  of  peinume&t  civil  sorvioe  employees. 


Financial  Administration:  Salabies 


87 


This  group  received  a  maximum  increase  of  $200.  On  May  15, 
1920,  an  inerease  of  $1  a  day  was  awarded  to  per  dion  laborm 
and  foremen. 

CHART  I 

Cnr  Emflotbbs'  Salabt  ImaBASEs  and  thb  Cost  of  Lnrmo,  1913  to  1927 


I 
I 


88 


Nbw  York  City's  Finances  and 


These  increases  were  still  regarded  as  inadequate,  and  on 
August  20,  1920,  the  following  increases  were  put  into  effect: 
22  per  cent,  to  those  receiving  $1,500  or  less;  20  per  cent,  to  those 
receiving  $1,501  to  $2,500;  $500  to  those  receiving  over  $2,500, 
with  the  restriction  that  no  salary  was  to  exceed  $7,500. 

The  Budget  for  1924  fixed  a  minimum  salary  of  $2,200  for 
public  works  inspectors  and  investigiktors  in  the  departments  of 
Finance  md  Docks.  Rre  prevention  inspectors  were  allowed  a 
minimum  of  $2,000,  and  other  inspectors  a  TniniTniiTn  of  $1,800. 

Recent  Wage  Increases 

The  Budget  for  1925  provided  for  the  distribution  of  substan- 
tial sums  to  increase  the  compensation  of  clerical,  engineering, 
legal,  and  inspectional  employees.  Other  extensive  salary  in- 
creases for  certain  groups  of  ^ployees,  particularly  inspectors, 
were  adopted  by  resolution  in  May  of  that  year.  The  fimds  were 
provided  out  of  each  department's  budget  appropriation.  In 
July  of  the  same  year,  the  salaries  of  inspectors  in  the  offices  of 
the  various  borough  presidents  were  raised  to  a  munimum.of 
^^,4[00» 

The  1926  budget  appropriated  $300,000  for  wage  increases  in 
the  skilled  trades  to  make  the  scales  conform  to  prevailing 
private  rates.  Another  $1,000,000  was  provided  for  readjust- 
ments in  the  salaries  of  other  employees.  The  Director  of  the 
Budget  was  charged  with  apportioning  these  increases  with  the 
approval  of  the  Board  of  Estimate. 

The  Budget  for  1927  carried  $1,500,000  for  increases  in  the 
skilled  trades,  and  $1,000,000  for  readjustments  m  the  salaries 
of  other  employees,  to  be  distributed  in  the  same  manner.  This 
latter  fund  was  alloted  on  March  29  to  8,500  municipal  employees. 
The  majority  of  these  are  in  clerical  service,  though  150  highly 
paid  ''^cempt"  officials  recdved  increases.  The  public  hearing 
which  was  held  by  the  Board  of  Estimate  on  the  salary  increases 
disclosed  the  fact  that  some  employees  had  been  entirely  over- 
looked in  the  distribution.  It  was  promised  that  th^y  would  be 
taken  care  of  later  from  other  funds. 


Financial  Administration:  Salaries  89 

Promotions''  That  Are  Merely  Salary  Increases 

Under  existing  regulations,  department  heads  may  advance  an 

employee  to  a  higher  salary  when  a  vacancy  occurs  in  a  position 
in  the  same  classification  carrying  the  higher  salary.^  A  vacancy 
may  occur,  for  example,  in  a  third  grade  clerkship  carrying  a 
salary  of  $1,800.  The  department  head  may  as&dgn  this  salary 
to  a  $1,200  clerk  of  Grade  2,  who  has  passed  a  promotional  exami- 
nation and  is  on  the  eUgible  list  for  Grade  3.  Since  the  Civil  Ser- 
vice Commission  is  not  required  to  investigate  the  appointment 
or  the  work  involved,  th^re  is  no  assuranoe  that  the  empk^yee 
awarded  the  Grade  3  salary  will  be  assigned  to  the  work  of 
higher  calibre.  Often  he  is  allowed  to  continue  the  low  grade 
work,  and  the  department  head  appoints  a  clerk  to  undertake  the 
more  responsible  work  at  the  lower  rate  of  pay.  Fairly  recent 
appointees  may  thus  recdve  the  compensation  provided  for  em- 
ployees who  have  been  in  the  city  service  for  many  years.  Fur- 
thermore, an  employee  may  be  allowed  a  rate  of  cojoapensation  in 
excess  of  the  rate  assigned  to  the  grade  of  work  in  which  he  is 
employed.  The  salaries  of  innumerable  employees  have  thus 
been  increased  in  recent  years  through  so-called  "promotions" 
which  involve  no  change  in  duties  and  no  increased  responsibility. 

Promotional  examinations  are  required  whenever  the  new  posi- 
tion carries  a  rate  of  pay  in  excess  of  the  grade  limits  fixed  by  the 
civil  service  classification.  The  Civil  Service  Commission  has 
adopted  the  pohcy  of  filUng  every  possible  promotion  from  within 
the  department  or  bureau  involved.  Promotion  eligible  lists 
exist  for  nearly  every  organization  unit  and  it  is,  ther^ore, 
relatively  easy  for  a  department  head,  perhaps  in  perfectly  good 
faith,  to  avoid  the  intent  of  the  Civil  Service  Law  and  increase 

iThe  Civil  Service  Law,  Laws  of  1909,  Chapter  15,  Section  16,  provides:  "Va- 
cancies in  positions  in  the  competitive  dass  shall  be  filled,  so  far  as  practicable,  by 
promotion  from  among  penMms  holding  positions  in  a  lower  grade  in  the  department, 
office,  or  institution  in  which  the  vacancy  exists.  Promotion  shall  be  based  upon 
merit  and  competition,  and  upon  the  superior  quaUfications  of  the  person  pro- 
moted as  shown  by  his  previous  service,  due  weight  being  given  to  seniority.  For 
the  purposes  of  this  section  an  increase  in  the  salary  or  other  compensation  of  any 
person  holding  an  office  or  position  within  the  scope  of  the  rules  in  force  hereunder, 
beyond  the  limit  fixed  for  the  grade  in  which  such  office  or  posititm  is  dassified, 
shaH  be  deemed  a  promotion." 


do 


Ninr  YoBx  Cut's  Financbs  and 


individual  salaries  beyond  the  value  of  the  work  that  is  being 
performed.  The  Commission's  general  poUcy  on  promotions 
serves  to  encourage  such  increases  and  to  make  for  inequalitieB. 

Raies  Modified  by  Terms  of  the  Budget 

The  Board  of  Estimate  and  Apportionment  has  for  several 
years  recognized  that  the  old  civil  service  salary  boundaries  were  no 
longer  adequate.  New  maximum  schedules  of  pay  have  been 
provided  in  the  Terms  and  Conditions  of  the  Budget  ^  for  certain 
institutional  employees  in  the  Departments  of  Public  Welfare, 
Health,  Correction,  and  Bellevue  and  Allied  Hospitals.  The 
Bu<^Set  thus  authorizes  department  heads  to  fill  vacancies,  not 
at  the  minimum  of  the  grade  called  for  by  the  civil  service  rules, 
but  at  the  next  higher  rate  as  shown  in  a  compensation  table 
printed  in  the  budget.  But  even  this  attempt  at  some  degree  of 
standardization  is  not  always  effectual,  since  "special"  exceptions 
are  not  imcommonly  made  by  the  Board  of  Estimate. 

Department  heads  are  frequently  heard  to  complain  about 
thdr  inabihty  to  obtain  competent  employees  at  the  low  rates  of 
pay  provided  for  certam  positions,  particulariy  under  the  civil 
service  salary  grades.  It  is  probable  that  to  a  considerable 
extent  this  inabihty  is  due  to  the  promotional  practice  described 
above,  which  has  served  to  fill  many  low  grade  jobs  with  high 
priced  employees.  Positions  carrying  very  low  salaries  are 
necessarily  filled  by  temporary  appointees  since  permanent 
appointments  will  not  be  accepted  at  inadequate  compensation. 
Temporary  appointments  in  considerable  number,  it  may  be 
pointed  out,  are  undesirable  since  they  fail  to  oonfom  to  dvil  ser- 
vice requiremmts. 

Oeneral  Bemdts  of  the  Wage  Increases 

A  very  definite  lack  of  policy  is  thus  apparent  in  awarding 
salary  increases  in  the  municipal  service.  What  have  been  the 
results  of  the  more  or  less  haphazard  method  of  effecting  increases 
during  the  past  decade?  Every  conceivable  salary  rate  is  found 


Financial  AniimiBTaAiioN:  Salambs  91 


in  the  Budget.  An  examination  discloses,  for  example,  such 
rates     $2,100,  $2,101,  $2,105,  $2,106,  $2,140,  $2,160,  etc. 

The  flat  increases  awarded  some  years  ago  provoked  nummus 
instances  of  inequality  so  that,  for  example,  office  boys  were 
receiving  more  pay  than  clerks,  and  supervisors  received  less 
than  employees  working  under  them.  These  situations,  however, 
have  since  been  adjusted.  In  general,  employees  of  a  lower  grade 
profited  a  great  deal  more  in  proportion  as  a  result  of  the  per- 
centage increases  than  did  employees  in  more  responsible  posi- 
tions. An  employee  receiving  $1,200  in  1918,  received  $1,824, 
or  an  increase  of  52  per  cent,  in  August  1920.  An  employee 
receiving  $1,800  in  1918  was  advanced  to  $2,622  in  1920,  an 
increase  of  45  per  cent.  A  clerk  at  $3,000,  however,  received  an 
increase  of  but  16  per  cent,  during  the  same  period,  to  $3,480. 

Inequalities  in  Rates  of  Pay 

Although  no  detailed  analysis  of  the  large  number  of  positions 

in  the  city  service  has  been  possible  in  this  study,  certain  facts 
are  readily  apparent  with  regard  to  the  lack  of  standardization 
in  compensation.  The  budget  itself  discloses  wide  variations  in 
pay  for  positions  carrying  the  same  payroll  title.  Unfortunately, 
the  budget  does  not  indicate  the  grade  of  a  given  position,  so  that 
the  title  of  "clerk"  may  mean  an  office  boy  or  a  clerk  exercising  a 
certain  degree  of  supervision  of  others.  An  examination  of 
Table  IV  uidicates  the  wide  range  of  pay  carried  by  the  same 
tiUe  in  various  departments. 

A  striking  illustration  of  the  variations  shown  by  the  Table 
IV  is  that  the  position  "clerk"  carries  from  $480  to  $7,000  m 
salary.  Even  thoi^  it  is  assumed  that  each  of  the  positions  in 
question  varies  m  its  duties  so  as  to  justify  a  different  rate  of  pay, 
it  will  be  seen  that  the  classification  plan  is  badly  at  fault  in  not 
indicatmg,  by  the  use  of  different  titles,  the  difference  in  respon- 
sibility. Stenographers  and  typewriters  are  paid  from  t960  to 
$4,000;  it  is  doubtful  whether  any  ordinary  stenographic  position 
in  private  employment  would  receive  much  more  than  $2,500. 
Positions  with  larger  compensation  are  usually  those  of  private 
secretaries  or  court  reporters.  Messenger  work  is  largely  imiform 


92 


Nsw  ToBX  Cimr's  Finakgis  and 


TABLE  IV 


Range  of  Salabies  in  Various  Departbibnts  fob  Csbtain  Trpas 

OF  Positions 


Number  of 
Incumbbnts 

Clerk 

Board  of  Estimate  and  Apportionment  . 

42 

$900 

$4,250 

Dqiartment  of  Finanoe  

486 

1,171 

5,750 

Lftw  De|Murtment  

lOG 

960 

6,000 

Department  of  Taxes  and  Aasonments  .  . 

69 

960 

2,880 

Civil  Service  Commission  .    .  . 

40 

760 

3,700 

Department  of  Education  

469 

780 

7,000 

Police  Department  

41 

1,260 

4,500 

Fire  Department  

85 

760 

5,500 

DoiMurtmient  of  Health  ...... 

262 

760 

4.500 

Department  of  Welfare  

109 

760 

3,750 

Department  of  Water  Su^ily,  Qaa,  and 

Electricity  

92 

480 

5,250 

x^epari/menL  oi  oireei/  v^ieanmg    •     •     •  . 

A  OCA 

4,Z0U 

jjepanment  oi  vjorreciion  

Ten 

O  OCA 

3,250 

1/epartment  oi  i^iant  ana  otructunB 

o4 

960 

3,250 

MJeputinuBDit  01  iriirQiiase 

760 

4^150 

Stenographer  and  Typewriter 

Board  of  Estimate  and  Apportionment  . 

18 

1.200 

2  300 

Department  of  Finance  

40 

1,200 

2,750 

Law  D^Mutment 

81 

1,200 

2,460 

Dcrvioe  vJommission  •••••• 

14 

960 

2,760 

Department  of  Educatkm     •    •    •    •  . 

180 

1,014 

4,000 

Department  of  Police  

9 

1,260 

2,500 

J?  ire  i>epartment 

15 

960 

2,750 

Department  of  Health  

62 

960 

2,160 

B^eviie  and  Allied  Hospitals  .... 

17 

960 

2,600 

AccountarU 

Department  of  Finance  

51 

2,400 

6,600 

Conmussioner  of  Accounts     .    •    «    .  . 

38 

1,900 

4,000 

Dqmrtment  of  Finance  

20 

1,560 

2,890 

Law  Department  

3 

1,800 

2,100 

President,  Borough  of  Manhattan    .    .  . 

16 

1,625 

2,790 

Pkerident,  Borough  of  Bronx  

5 

2,005 

2,178 

Pkeaident,  Borough  of  Brooklyn  .... 

7 

1,550 

2,160 

Department  of  Plant  and  Structuwa     .  . 

7 

1,537 

2,159 

Department  of  FUTGhaae  

2 

1,710 

1,700 

Amiikaii  Enginm 

Board  oi  Estimate  and  Apportionment  .  . 

22 

2,750 

5,800 

Fkesidenti  Borou|^    Manhattan   .    .  . 

42 

2,432 

5,250 

Financial  ABiONumtATioN:  Salabobs 


03 


TABLE  IV  (CoiKtniMd) 


Bangs  of  Salabies  in  Various  Departmsnts  wsl  Csbtain  Types 

OF  Positions 


NuMBBS  or 

AIM  V  U  M  WHI  «1 

Ifomnm 

Assistant  Engineer  {Continued) 

27 

$2,760 

$6,000 

PMndent,  Borough  of  Brooklyn  .... 

69 

2,376 

5,250 

Department  of  Education  

4 

3,528 

4,320 

Department  of  Water  Supply,  Gaa,  and  El- 

30 

2,160 

6,000 

Department  of  Plant  and  Structures 

28 

2,460 

7,500 

14 

3,000 

6,000 

Watchman 

Metropolitan  Museum  of  Art  .... 

22 

1,255 

1,381 

American  Museum  of  Natural  History  . 

12 

1,288 

1,683 

10 

1,200 

1,500 

Brooklyn  Institute  of  Arts  and  Scienoes 

5 

1,317 

1,317 

D^Mfftment  of  Paiks,  Queens  .... 

8 

1,500 

1,500 

Statoi  Island  Institute  of  Arts  and  Scienoes 

1 

800 

800 

6 

720 

1,185 

SatiABIIBIi  Paid  PMmAfioN  Officebs  and  Related  Social  Wobksbs 


• 

Chibf 

Probation 
Officer 

DSFOTT  Cnxmw 

Pbobatiok 
Officer 

FBOBASaOW  OmcHB 

Special  Sessions 
Children's  Court 
City  Magistrates'  Courts 
General  Sessions    .  . 
Parole  Comminion  ^ 

1— $4,100 
1—  6,000 
1—  4,100 
1—  7,500 
1~  3,600 

3— $3,000  to  $3,300 
3—  3,250  to  3,500 

2—  5,000 

3—  2,613 

21— $1,560  to  $2,613 
60—  1,800  to  2,700 
74^—  1,560  to  2,613 
27—  3,000 
30—  1,880  to  2,200 

and  would  not  appear  to  warrant  a  salary  range  of  more  than 
$1,200  as  shown  by  the  table.  Considerable  variation  is  shown 

in  the  salaries  for  watchmen. 

A  more  exhaustive  inquiry  would  undoubtedly  disclose  many 
inconsisteneies  and  inequalities.  There  is  no  definite  standard  in 
effect  for  paying  many  groups  of  employees.  In  some  cases  the 
titles  are  probably  at  fault.  In  others,  where  the  character  of  the 

^  Has  parole  instead  of  probation  ofiSoos. 


01  Nsw  YoBx  Crnr's  Fin angis  amd 


work  varies,  the  salaries  paid  show  a  disproportioiiate  variation.^ 

Some  employees  undoubtedly  receive  considerably  less  for  per- 
forming work  comparable  to  that  of  liigher  paid  employees. 
There  are,  however,  relatively  few  oonspiouous  instances  of 
groups  of  employees  being  underpaid.  Scientific  and  technical 
workers,  as  a  class,  do  not  appear  to  have  benefited  as  much  by 
recent  salary  increases  as  have  mechanics  and  clerks.  The 
highest  rate  apparently  paid  for  bacteriologists  is  $3,350;  out  of 
22  miployed  in  the  Department  of  Health,  17  receive  less  than 
$2,500.  The  compensation  of  medical  superintendents  of  the 
city  hospitals  is  said  to  be  lower  than  that  paid  by  private  institu- 
tions. The  Department  of  Public  Welfare  contends  that  it  is 
impossible  to  persuade  x-ray  and  other  laboratory  technicians  to 
alter  the  municipal  service  at  the  $1,260  rate  provided.  A 
regrading  of  engineers  also  appears  necessary. 

Comparison  of  Kates  with  Those  in  Pbivate  Employment 

The  general  adequacy  of  the  compensation  rates  is  suggested 
by  the  averages  discussed  above.  The  average  is  affected  to  a 
considerable  extent  by  the  rates  paid  certain  large  groups  (rf 
employees.  It  is  of  interest  to  inquire  how  the  compensation  of 
employees  in  the  more  important  groups  compares  with  com- 
pensation for  similar  work  outside  the  city  service.  There  are 
nearly  15,000  patrohnen  and  more  than  5,000  firan^  recdving 
from  $1,769  to  $2,500.  Rates  for  these  employees  are  ordinarily 
controlled,  in  part,  by  the  influence  which  large  groups  of  this 
kind  can  bring  to  bear  upon  the  appropriating  authorities,  and 
by  the  fact  that  it  is  deemed  advisable  to  provide  rates  which 
will  attract  married  men  or  make  it  possible  for  single  employees 
to  marry. 

In  connection  with  the  compensation  of  hremen  and  poUcemen, 
although  it  is  outside  the  scope  of  this  discussion,  attention 
diould  be  called  to  the  policy  of  using  large  numbers  of  the 

» For  example,  clerks  employed  in  checking  and  emiiiMliiiff  aamnment  liste  an 
paid  from  $1,260  to  $3,000  for  work  which  ckMs  not  wana&t  audi  idUe  vaaatknia 
in  oompensation. 


FiNAKciAL  AnifiNidTitiLTtoN:  Salabies 


95 


uniformed  forces  on  routine  clerical  work.  Many  policemen  and 
firemen  are  unsuited  for  office  work.  They  have  not  been  selected 
with  reference  to  such  quahfications,  and  the^''  are  performing 
tasks  which  could  be  much  more  economically  undertaken  by 
employing  ordinary  clerks  and  stenographers  at  lower  salaries. 
This  condition  is  not  peculiar  to  New  York.  In  the  Police 
Department,  such  use  of  the  uniformed  force  is  apparently  more 
prevalent  than  in  the  Fire  Department.  In  the  former  only  half 
as  many  civilian  clerks  are  anployed,  even  though  the  Pdice 
Department  is  much  larger. 

Rates  of  Pay  for  Mechanics 

Skilled  mechanics  of  various  kinds  also  serve  to  raise  the 
general  salary  level  of  municipal  employees,  since  the  skilled 
rates  are  governed  for  the  most  part  by  those  fixed  by  organized 
labor.  Until  about  two  years  ago,  the  rates  for  the  skilled  trades 
were  established  in  accordance  with  the  prevailing  rates,  as 
indicated  by  a  survey  made  by  the  Board  of  Estimate.  The 
rates  paid  large  groups  of  workers  in  various  trades  were  ascer- 
tained and  the  municipal  rate  fixed  in  accordance  with  the  pre- 
vaihng  rate  of  the  positions  surveyed. 

Table  V  shows  the  rates  paid  in  1926  for  the  unportant  skilled 
trade  classes  as  compared  with  the  union  rates  paid  by  the  Build- 
ing Trades  Employers'  Association,  the  rates  paid  at  the  United 
States  Navy  Yard,  Brooklyn,  and  the  rates  of  a  large  number  of 
New  York  employers  belongmg  to  the  National  Metal  Trades 
Association. 

The  municipal  rates  will  be  seen  to  be  lower  than  the  estabUshed 
union  rates  recognized  by  the  Building  Trades  Employm'  Associ- 
ation, but  increases  in  the  scale  are  proposed  for  the  coming  year. 
The  present  rates,  however,  are  fully  comparable  to  the  union 
rates  when  consideration  is  given  to  the  fact  that  practically 
all  of  the  city  employees  work  the  year  round,  receive  a  vacation 
with  pay,  and  enjoy  pulsion  privil^es.  The  ordinary  building 
trade  mechanic  in  private  employment  works  only  from  225  to 
250  days  a  year,  so  that  his  annual  income  is  no  greater  than 
that  of  the  city  worker.   It  will  be  noticed  that  the  municipal 


96  Nsw  YoBX  City'b  Financto  and 


TABLE  V 

COMPARATIVB  RaTBS  FOR  SKILLED  TbADSS  (PBB  DxKM) 


BUILDINO 

New  York 

Trades 

Navy  Yard, 

CiTT  Rata 

Emplotkbs' 

Bbookltm, 

N.  y. 

Automobile  Machinist  

10.00 

•  ■  •  • 

$6.96 

Blacksmith  

9.50 

$12.00 

7M 

naekBmitli  Helper  

7.00 

9.00 

&04 

Mdday«r  

12.00 

14.00 

.... 

Carpenter  

10.50 

12.00 

7.20 

Dockbuilder  

9.00 

12.00 

7.20 

Electrician  

9.50 

12.00 

7.60 

Electrician  Helper  

6.60 

8.00 

4.96 

House  Painter  

10.00 

12.00 

7.20 

Ijifoonr  (Cmnmm)  

5.60 

7.25 

4.40 

licensed  Firamui  

7.00 

C  OA 

Machinist  

9.50 

12.00 

7.20 

Machinist  Helper  

7.50 

9.00 

4.80 

Marble  Setter  

10.00 

12.00 

•  •  •  • 

Marble  Setter  Helper  

7.00 

9.50 

•  •  •  • 

Moulder  ......... 

8.00 

•  •  •  • 

7.84 

Niekillltltr  

9.00 

•  •  •  • 

Oiler  

7.00 

6.00 

Plumber  

11.00 

12.00 

7.60 

Plumber  Helper  

6.00 

•  •  •  • 

•  •  •  • 

Ship  Carpenter  

9.00 

•  •  •  • 

7.60 

Ship  Caiilker  

7.20 

•  •  •  • 

6.80 

Stationary  Engineer             .    .  . 

8.50 

11.00 

7.20 

Steam  Fitter  

11.00 

12.00 

•  •  •  • 

Steam  Fitter  Helper  

8.00 

8.50 

Sheet  Metal  WoilDer  

10.00 

12.00 

7.60 

Stonecutter  

9.00 

14.00 

•  •  •  • 

Welder  

9.50 

7.20 

Note:  Municipal  rates  as  riiown,  in  1926  budget;  buflding  trade  rates  from 
Bmlding  Tndm  Employers'  Association,  30  West  33rd  Street;  and  Navy  Yard 
rates  from  pamphlet,  Schedule  of  Wages  for  CM  Employees,  1926,  pubUshed  by  the 
United  States  Navy  Department.  Hourly  rates  were  converted  into  an  eight  hour 
day  rate.  Recent  figures  furnished  by  the  United  States  Bureau  of  Labor  Statis- 
tics corroborate  the  union  rates  generally  paid  in  the  building  trades. 

rates  are  from  20  to  50  per  cent,  higher  than  those  paid  by 
the  national  government,  which  considers  that  a  guarantee 
of  permanent  employment  warrants  a  reduction  in  the  union 
scales. 


Financial  Administration:  Salaries 


97 


Rates  of  Pay  for  Office  Workers 

Comparisons  between  the  rates  paid  for  ordinary  clerical  ser- 
vice by  the  city  and  by  private  employers  are  difficult  in  the 
absence  of  a  detailed  analysis  of  the  positions  in  question.  Statis- 
tical data  is  lacking  and  the  Civil  Service  Commission  keeps 
no  record  of  the  number  of  clerks  of  various  grades  employed. 
The  liberal  maximum  compensation  provided  for  clerical  positions 
has  been  shown  in  Table  IV.  Individual  cases  also  appear  to 
suggest  that  the  city  pays  considerably  more  for  clerical  work  than 
large  private  employers.  Data  was  gathered  from  one  of  the 
largest  clmcal  organizations  in  the  city.  Here  there  was  found 
a  group  of  about  2,000  record  or  data  clerks,  mail  readers,  and 
typists,  who  do  work  involving  some  special  training  and  requir- 
ing ordinary  intelligence.  The  average  compensation  was  $24.31 
a  we^  Althougjh  there  is  a  great  deal  of  ordinary  clerical  work 
of  this  kind  in  the  city  service,  it  is  readily  apparent  from  an 
examination  of  the  budget  that  the  majority  of  clerks  and  typists 
comparable  to  the  group  in  question  are  receiving  in  tiie  ndgh- 
borhood  of  $30  to  $35  per  week.  The  avmge  pay  for  the  stenog- 
raphers in  the  private  organization  in  question  is  $23  a  week, 
which  is  apparently  from  15  to  20  per  cent,  lower  than  the  muni- 
cipal rate  for  similar  work. 

liberal  clerical  salaries  in  the  city  service  are  particulariy 
to  be  found  in  the  Department  of  Education.  The  budget  for 
1927  discloses  14  clerks  receiving  more  than  $4,000  a  year,  25 
receiving  $3,528,  and  152  who  receive  $2,000  or  more. 

An  isolated  example  of  municipal  rates  that  are  considerably 
higher  than  those  paid  by  private  employers  is  the  rate  for 
Department  of  Plant  and  Structures  ticket  agents,  who  receive 
as  high  as  $2,300  a  year,  as  compared  with  a  rate  of  about  $1,500 
on  the  outside. 

Breakdown  of  the  Classification  Scheme 

A  definite  plan  of  classifying  the  various  types  of  employment 
was  completed  in  ldl6,  and  the  ^orcement  of  the  clarification 
pbiQ  was  entrusted  to  a  Bureau  of  Standards,  attached  to  the 


98 


New  Yobk  City's  Finances  and 


Board  of  Estimate  staff.  As  a  part  of  its  programme,  the  admin- 
istration eliminated  a  number  of  employees  in  the  interest  of 
eoonomyi  and  in  the  mayoralty  campaign  of  1917  this  was  made 
an  issue.  The  new  administration  proceeded  to  abandon  the 
classification  scheme,  and  abolished  the  Bureau  of  Standards. 

Except  as  the  Civil  Service  Commission  has  continued  to  use 
the  classification  as  a  basis  for  selecting  new  employees,  the 
classification  can  no  longer  be  said  to  be  toily  operative.  Many 
instances  may  be  cited  where  the  titles  of  positions  do  not  describe 
the  duties  of  positions,  although  the  state  law  specifies  that 
"no  person  shall  be  appointed  or  employed  under  any  title  not 
a|ipiopriate  to  the  duties  to  be  performed."  The  title  "medical 
inspector,''  used  in  the  Health  Department,  applies  not  only  to 
physicians  engaged  in  conducting  medical  examinations  of  school 
children,  but  to  a  physician  who  serves  as  consultant  to  the 
health  commissioner  on  various  subjects  and  to  the  assistant  chief 
of  the  Bureau  of  Child  Hygiene.  The  title  "hospital  helper" 
which  appears  in  the  budget  of  the  Department  of  Public  Welfare 
is  used  for  employees  serving  as  garagemen,  laborers,  and  clerks. 
Many  so-called  "clerks"  are  eith^  supervisors  or  accountants  or 
auditors  and  are  paid  accordingly.  Both  mechanical  draftsmen 
and  topographical  draftsmen  are  foimd  employed  on  drawings  of 
water  main  extensions.  Some  of  the  "clerks"  are  engaged  in 
stenographical  or  secretarial  work,  and  should  be  so  classified. 
The  Civil  Service  Commission  endeavors  to  curb  ibe  use  of  mis- 
descriptive  titles  when  such  matters  are  called  to  its  attention, 
but  in  the  absence  of  a  definite  classification  record,  it  does  not 
possess  the  necessary  informatioii. 

Revmm  of  ClassificaJtion  Needed 

The  revision  of  the  old  classification  scheme  is  much  needed. 
A  workable  classification  of  positions  involving  the  same  duties, 
requiring  the  same  qualifications,  and  assigned  the  same  salary 
limits,  is  just  as  essential  in  buying  personal  service  as  are  defin- 
ite specifications  in  the  purchase  of  commodities.  If  descriptive 
titles  and  specifications  for  various  types  of  employment  are 
adopted,  the  Board  of  Estimate  and  taxpayers  interasted  in  the 


Financial  Administration:  Salaries 


99 


affairs  of  the  municipality  will  be  in  a  position  to  know  something 
of  the  character  of  the  work  entrusted  to  an  employee  bearing  a 
certain  title.  This  title  will  indicate  the  kind  of  examination 
involved  in  obtaining  an  appointment  to  the  position  and  will 
carry  with  it  a  definite  salary  range.  Specifications  of  this  kind 
are  of  value  to  the  Civil  Service  Commission  in  informing  pros- 
pective applicants  of  the  duties,  qualifications,  and  salaiy  in- 
volved. Department  and  bureau  heads  will  be  provided  with 
definite  standards  when  they  appear  before  the  Board  of  Estimate 
and  seek  authority  for  the  employment  of  additional  workers  of 
a  given  kind.  The  Board  will  know  just  what  types  of  positkms 
are  in  question. 

Suggested  Impravemenis  in  ClassificaHan 

Considerable  progress  has  been  made  in  recent  years  in  the 
technique  of  personnd  classification.  Many  improvements,  theie- 
fore,  can  be  made  in  the  present  plan.  The  nomenclature  should 
be  simplified.  At  present  there  is  considerable  confusion  in  the 
use  of  the  words  "class,"  "service,"  "part,"  "group,"  "grade," 
and  "position."  The  bufge  subdivisbns  or  classes  set  up  under 
the  state  law  have  been  subdivided  into  "services"  but  these 
have  not  been  thoroughly  worked  out  along  functional  lines.  A 
large  number  of  positions  remain  in  the  "ungraded  service." 

One  of  the  most  serious  criticisms  of  the  present  dassification 
is  that  it  provides  no  scheme  for  showing,  by  the  title  of  a  position, 
its  relative  rank  with  regard  to  other  positions  which  differ  not 
in  the  nature  of  the  work  involved  but  in  the  degree  of  respon- 
sibility. If  a  series  of  titles  such  as,  for  example,  under  clerk, 
junior  derk,  s^or  clerk,  head  clerk,  and  duef  clerk,  were  used 
in  subdividing  the  thousands  of  positions  now  Hsted  in  the 
budget  merely  as  "clerk,"  the  relative  importance  of  the  various 
positions  would  be  more  clearly  indicated.  Commercial  practice 
now  subdivides  engineers  into  juniors,  assistants,  associates, 
seniors,  chiefs,  etc.  Similar  improvements  can  be  made  in  the 
titles  of  inspectors  and  other  groups. 

Very  few  of  the  titles  at  present  in  use  indicate  clearly  «ifwigh 
dth^  the  vocational  specialissation  of  the  work  perforn^  or  its 


100  Nbw  Yobk  Crnr's  Finangkb  and 


place  in  the  organization  structure.  Thus  positions  like  those  of 
Searcher,  Attendant,  Supervisor  of  Complaints,  Measurer,  Chief 
Inspector,  or  Assistant  Engineer  may  involve  work  of  almost  any 
kind  in  any  department.  It  is  not  enough  to  call  an  employee  an 
Engineer.  He  is  eith^  a  Civil,  Mechanical,  Electrical,  Auto- 
motive, or  other  Engineer.  It  is  usually  necessary  further  to 
subdivide  even  civil  engineering  into  its  numerous  branches. 
Inspectors  should  be  definitely  tagged  Building  Inspector,  Fire 
Prevention  Inspector,  and  so  forth,  as  the  case  may  be.  Many 
other  descriptive  titles  should  be  employed,  such  as  Purchasing 
Clerk,  Psychiatric  Nurse,  or  Assistant  Occupational  Therapist. 
The  diortcomings  of  the  present  classification  {dan  have  been 
recognized  in  part  by  the  adoption  of  a  few  cumbersome  though 
descriptive  titles,  such  as  "clerk  with  knowledge  of  card  indexing.'* 

Need  Jot  Detailed  Wage  Survey 

The  existing  classifications  and  speeifications  invite  revision. 

Better  titles  should  be  selected.  In  some  instances  a  finer  sub- 
division of  the  classification  will  be  foimd  necessary.  The  same 
tities  should  be  used  throughout  on  payrolls,  in  ?»ftlg^"e  appro- 
priations, and  by  the  Civil  Service  Commission. 

The  Commissioner  of  Accounts,  recognizing  the  importance  of 
having  a  definite  record  of  all  the  positions  in  the  city  service, 
«ich  as  is  not  now  in  existence,  has  recentiy  required  every  city 
employee  to  fill  out  a  form  giving  a  brief  statement  of  his  duties. 
These  data  will  be  of  great  value  for  a  study  of  the  city's  wage 
problem.  The  questionnaire  is  hardly  complete  enough,  how- 
ever, to  provide  a  full  record  of  the  position  and  of  the  employeei 
audi  as  is  needed  and  should  be  on  file  in  eonneetkm  witii  em- 
ployment as  distinguished  from  budget  processes.  Additional 
data  are  desirable.  This  should  include  the  place  of  work,  the 
place  of  the  position  in  the  organization,  the  amount  of  supervision 
involved,  maintenance  or  other  remuneration,  uniforms,  etc., 
hours  of  work,  age,  and  home  address,  record  of  employment  in 
the  city  service,  and  data  from  immediate  superiors  regarding 
the  requirements  of  the  position  in  respect  of  experience,  special 

knowledge,  mechanical  skill,  or  physical  attributes.  A  detailed 


Financial  Administration:  Salaries  101 


description  of  the  work  itself  is  of  primary  importance,  since  it  is 
obviously  impossible  to  conduct  a  personal  investigation  of  each 
of  the  seventy-five  thousand  positions  in  the  municipal  service. 

Definite  Salary  Scales  Suggested 

The  salary  grades  set  up  by  the  Civil  Service  Commission 
should  be  discarded  and  for  each  group  of  similar  positions  or 
"classification,"  a  definite  salary  scale  should  be  adopted  by 
the  Board  of  Estimate.  Thus,  for  a  new  classification  of  junior 
stenographer  there  might  be  provided  a  scale  of  $1,200-$1,320- 
$1,440-$1,560.  New  appointees  under  such  a  scale  would  enter 
the  service  at  $1,200,  and  be  advanced  one  step  each  year  until 
they  reached  the  maximum  for  the  class.  Advancement  within 
the  salary  scale  should  be  withheld  if  the  employees'  efficiency 
records  do  not  measure  up  to  the  required  standards.  Before 
receiving  any  further  increases,  they  would  have  to  qualify  for 
the  position  of  senior  stenographer  and  be  assigned  to  more 
difficult  work. 

Part  of  the  Civil  Service  Rules  should  be  rewritten.  The  Civil 
Service  Commission  should  exercise  more  authority  over  the  use 
of  payroll  titles  and  the  classification  of  positions.  Since  the 
Commission  is  required  to  fill  the  positions  in  question,  it,  rather 
than  the  Board  of  Estimate,  should  investigate  the  work  to  be 
performed  and,  in  conjunction  with  tiie  department  head,  de- 
termine the  classification.  The  Commission  should  broaden  its 
poUcy  of  promotion  and  make  it  possible  for  employees  to  transfer 
across  departmental  lines,  especially  when  there  are  no  further 
opportimities  for  advancement  where  they  are.  The  preset 
policy  of  establishing  promotion  ehgible  fists  in  every  depart- 
mental unit  is  tending  in  the  direction  of  countless  examinations 
for  individual  positions  rather  than  for  a  related  group  or  dasaifi- 
cation  of  positions. 

A  classification  programme,  such  as  is  suggested,  should  prob- 
ably be  undertaken  under  the  direction  of  the  Civil  Service  Com- 
mission since,  after  all,  it  needs  to  know  a  great  deal  more  than 
does  the  appropriating  agency  regarding  the  duties  of  the  positifms 
in  the  service.  Personnel  examiners  of  the  Board  of  Estimate, 


102  New  Yobk  Cmr's  Finances  and 

however,  should  cooperate  in  the  work.    New  compensation 

schedules  should  be  recommended  by  the  classification  agency- 
after  the  completion  of  the  survey.  The  compensation  plan 
should  be  adopted  by  the  Board  of  Estimate  for  the  classification 
as  a  whole.  After  the  adoption  of  the  new  schedules,  adjustments 
in  rates  of  pay  should  be  made  only  for  groups  of  positions  or  an 
entire  classification  and  in  no  instance  for  individual  employees. 
From  time  to  time,  in  connection  with  the  preparation  of  the 
budget,  systematic  revisions  of  the  entire  compensation  plan 
diould  be  made.  A  repetition  of  the  present  situation  will  be 
inevitable  unless  the  Board  of  Estimate  abandons  its  present 
plan  of  sporadic  increases. 


CHAPTER  IV 


NEW  YORK  CITY'S  PURCHASING  AGENCIES  AND 

METHODS 

New  York  City  is  one  of  the  biggest  governmental  buyers 
in  the  United  States.   Its  expenditures  for  supplies,  materials, 

  0  

and  equipment  are  exceeded  only  by  those  of  the  United  States 
government.  Its  purchases  comprise  a  vast  array  of  articles 
ranging  all  the  way  from  thumb  tacks  to  steam  rollers,  and  in- 
clude all  kinds  of  sustenance  conunodities  for  the  thousands  of 
inmates  in  the  city's  penal,  charitable,  and  correctional  institu- 
tions. In  1922,  the  Board  of  Purchase,  acting  for  only  the 
''mayor's  departments,"  bought  3,352,000  pounds  of  beef,  lamb, 
and  veal;  704,000  dozen  eggs;  672,000  pounds  of  butter;  295,300 
tons  of  coal;  and  2,739,000  gallons  of  gasoline.  These  w«re  some 
of  the  leading  items  on  the  city's  "shopping  list."  * 

It  is  obvious  that  the  methods  followed  in  spending  such 
huge  amounts  are  of  great  importance  in  dollars  and  cents.  It 
is  obvious  also  that  purchasing  practices  are  intimately  connected 
with  the  form  and  content  of  the  city's  budget  and  with  the 
accoimting  machinery. 

The  budget  of  New  York  City,  however,  is  not  designed  to 
show  accurately  and  precisdy  how  much  is  spent  annually  for 
supplies,  materials,  and  equipm^t.  Appropriations  are  made  to 
each  spending  agency  for  "supplies,  equipment,  and  materials," 
but  this  does  not  tell  the  whole  story.  A  separate  budget  allot- 
ment termed  "contract  or  open  order  service"  is  made  to  each 
department  for  repairs,  alterations,  replacements,  and  new  con- 
struction projects,  and  includes  labor  as  well  as  commodities. 
Supplementary  appropriations  which  are  made  throughout  the 

>f\gixs^  quote^  from  QrmOer  Nm  York,  June  18,  1023,  page  16. 

m 


104  New  Yobx  City's  Financbs  and 

year  by  the  Board  of  Estimate  and  Apportionment  still  further 

complicate  the  situation.  For  this  reason,  it  is  exceedingly 
difficult  to  secure  definite  figures  on  the  total  spent  by  each  using 
agmcy,  or  by  the  entire  mty  gjoivmaomt  lor  supplies,  materials, 
and  equipment. 

The  1926  and  1927  budgets  made  the  following  appropriations: 

SuppKes                                                         $10,879,000  $11^,000 

Equipment                                                              4,042,000  4,055,000 

Materials                                                              3,035,000  3,306,000 

Contract  or  open  order  service  (includes  both  personal 

services  and  commodities)                                  21,026,000  28,902,000 

$38,982,000  $48,728,000 

The  largest  buyers  in  the  city  govemm^t  spent,  during  1926, 
the  following  sums  for  supplies,  materials,  and  equipment: 

Dqpartimeiit  of  Eiliuai«ion   $6,741,000 

Department  of  Public  Welfare   3,352,000 

Department  of  Street  Cleaning   2,212,000 

Department  of  Plant  and  Structures   1,702,000 

Bellevue  and  Allied  Hospitals   1,360,000 

Board  of  City  Record   1,318,000 

Department  of  Water  Supply,  Gas,  and  Electricity   1,032,000 

Fire  Department  ,    .    ..  904,000 

Department  of  Health   802,000 

Department  of  CorrectifHl   848,000 

Police  Department     ...............  ggg^OOQ 

These  figures  include  not  only  the  amount  appropriated  for  sup- 
plies, materials,  and  equipm^t,  but  also  approximately  that 
im>porti(m  of  the  appropriation  for  contract  or  open  order  service 
which  was  spent  for  commodities. 

Centralized  purchasing  has  been  adopted  in  pnnciple  in  over 
200  dties  of  the  United  States  and  Canada.  Escperience  has 
demonstrated  that  a  central  purchasing  agency,  with  a  reasonable 
degree  of  freedom  from  political  interference,  can  bring  about  a 
10  to  15  per  cent,  reduction  in  the  supply  cost. 

The  advantages,  briefly  summarized,  are: 

Bulk  orders,  representing  the  consolidated  requirements  of 
several  users,  result  in  increased  competition  and  lower 
prices. 


FiNAKOIAL  AdMINI81!R4TI0N:  PUBCHASmG  105 


Reduction  in  cost  of  preparing  and  publishing  the  advertise- 
ments, and  distributing  to  vendors  the  requests  for  quota- 
tions on  pending  orders.  One  advertisement  and  one 
notice  to  vendors  can  advertise  the  needs  of  ten  or  more 
departments  as  well  as  of  a  single  department. 

Elimination  of  purchasing  and  inspecting  staffs  in  the 
individual  departments. 

Lessening  of  work  in  finance  departments  through  reduction 
in  number  of  deposits  and  surety  bonds  to  be  accounted  for 
and  returned,  and  fewer  contracts  to  be  approved  and 
recorded. 

The  work  of  the  law  department  is  similarly  simplified,  for 
it  has  to  pass  upon  fewer  legal  notices  and  contracts. 

Volume  of  purchases  in  certain  commodity  fields  becomes 
large  enough  to  justify  employment  of  sti^  of  skilled 
bu3rers,  each  a  specialist  on  methods  and  prices  in  Us 
particular  line. 

For  many  years  New  York  City  has  been  making  slow  progress 
toward  centralized  purchasing.  The  Joint  Legislatiye  Committee, 
appointed  to  investigate  the  city's  finances,  recommended  to  the 
legislature  in  March  1909,  that  "the  city  should  be  required  by 
law  to  establish  a  bureau  for  the  purchase  of  supplies,  which 
Eliould  be  under  the  general  jurisdiction  of  the  Board  of  Estimate 
and  Apportionment,  the  head  €i  which  should  be  charged,  as  far 
as  practicable,  with  the  responsibility  for  the  purchase  of  all 
suppUes  for  the  city."  ^  The  New  York  Charter  Commission 
offered  a  provision  for  cmtralized  purchasmg  in  the  Adminia- 
trative  Code  which  was  presented  to,  but  failed  of  passage  by,  the 
legislature  in  the  same  year.  Comptroller  William  A.  Prender- 
gast,  in  1913,  submitted  to  the  Board  of  Estimate  and  Apportion- 
ment a  plan  for  a  central  purchasing  departmmt. 

The  first  definite  step  in  this  direction  was  taken  by  Mayor 
Mitchel  in  November  1914,  when  he  appointed  a  centralized 
purchasing  committee  headed  by  Henry  Bruere,  at  that  time 
City  Chamberlain.  By  the  Mayor's  order,  the  committee 
consolidated  the  contract  pundiafiing  at  Hm  28  departments, 
boards,  and  offices  whose  heads  wm  appointed  by  the  mayor 
(the  so-called  * 'mayor's  departments").    In  spite  of  the  half- 

1  UfUttthre  Dooument  No.  50, 1909,  pige  S5. 


106 


Nsw  YoBx  City's  Finances  and 


hearted  co^ieration  of  the  departments  of  the  city  goveminent, 
this  voluntary  and  ex  officio  body,  lacking  legal  sanction,  func- 
tioned with  marked  success  until  1919. 

In  that  year,  the  state  legislatiu*e  gave  the  Mayor  discretionary 
authority  to  create  a  Board  of  Purchase  of  three  or  more  commis- 
aoners  of  departments  acting  ex  offi^o.  This  board  appointed  by 
Mayor  Hylan  continued  until  the  creation,  in  1923,  of  the  present 
Department  of  Purchase. 

The  Purchasing  Agencies 

Since  the  establishment  of  the  Department  of  Purchase,  it 
is  commonly  believed  that  the  city  government  has  a  centralized 
purchasing  agency.  Such  is  by  no  means  the  case.  As  shown 
below,  the  Department  of  Purchase  is  not  a  real  purchasing 
agency;  nor  does  its  limited  jurisdiction  extend  to  all  the  city  and 
oounly  agencies  within  Greater  New  York.  Some  of  these 
agencies  piu-chase  independently;  others  share  that  responsibility 
with  the  Department  of  Purchase.  The  main  purchasing  agencies 
now  are: 

The  Department  of  Purchase 

The  Borough  President's  office  in  each  of  the  five  boroughs 

The  Board  of  City  Record 

The  Bureau  of  Supplies  of  the  Department  of  Education 

Department  of  Purchase 

The  Department  <rf  Purchase  was  established  by  Chapter  890, 
Laws  of  1923,  which  became  Sections  449-a  to  449-d  of  the 
Greater  New  York  Charter.  The  Department  is  headed  by  the 
Com]  xdssioner  of  Purchase  appointed  by  the  Mayor.  A  deputy 
oommissionership  was  created  by  Local  Law  No.  4,  of  1926. 

Hie  Department  has  jurisdiction  over  "the  procedure,  condi- 
tions, methods  and  practices  that  shall  prevail  in  regard  to  all 
purchases  and  storage  of  materials,  supplies,  and  equipment  by 
and  for  all  departments,  boards,  bureaus,  or  offices  of  the  City  of 
New  York  of  which  the  commissioners,  members,  or  other  ad- 
ministrative or  executive  bead^  are  appointed  by  the  Mayor, 


FiNANCUL  Administraiion:  PuBGHAsma  107 


except  the  Department  of  Education,  its  boards  and  bureaus."* 
Its  rules  and  regulations  are  subject  to  the  approval  of  the  Board 
of  Estimate  and  Apportionment  and  the  Corporation  Counsel. 

The  Department's  authority,  thar^ore,  extends  only  to  the 
mayor's  departments.  The  city  and  county  courts,  the  supreme 
courts,  the  public  libraries,  the  Board  of  Water  Supply,  the 
Board  of  Transportation,  and  the  Transit  Commission  purchase 
independently  by  virtue  of  special  statutes  or  charter  provisions. 
Several  semi-public  agencies,  such  as  museums,  buy  through  the 
Department  of  Purchase  when  the  expenditure  is  made  from 
city  funds,  but  independently  if  the  expenditure  affects  their 
private  funds. 

The  Department  of  Purchase  has  a  staff  of  100  besides  the 
Commissioner.   Its  budgets  for  1926  and  1927  were  as  follows: 

1926  1927 

Personal  service   $232,672  1248,779 

Overhead  expenses  for  supplies  and  all  services 

other  than  personal   9,254  17,800 

1241,026  tmjm 

The  work  af  the  Department  is  apportioned  among  the  follow- 
ing divisions:  general  office,  purchasmg,  execution,  inspection, 

laboratory,  and  statistical. 

During  1925  and  1926,  the  following  volume  of  purchases  was 
made  through  the  Departn^t: 


1925  1926 

Contracts  $12,566,676  $12,706,986 

Informal  awards                                            408,724  408,182 

Open  market                                             2,333.942  2,368,289 


$15,309,342  $15,573,457' 

Vfith  very  little  added  personnel,  the  Department  of  Purchase 

could  take  care  of  all  supply  expenditures  for  the  mayor^s  depart- 
ments, for  the  county  offices,  and  for  the  Borough  Presidents' 
offices.  If  responsibility  were  thus  centralized  in  the  Department 
of  Purchase,  separate  departmental  buying  could  be  eliminated 
and  many  economies  could  be  effected. 

» Charter,  Section  423. 

*  Figuies  furnished  by  Department  of  Purohaae. 


108 


Nsw  YoBK  Crrr's  Financ» 


The  Bmmgh  PreMenta*  Offices 

"Every  head  of  department  and  each  President  of  a  boroii^ 
shall  have  cognizance  and  control  ol  the  inirchase  of  fuel,  fund- 
tur^  utoEimIs,  books,  and  other  arttcles  needed  for  the  public 
service  witi^  his  department  or  jurisdiction."* 

The  supplies  purchased  by  the  Borough  Presidents'  offices  are 
in  the  main  for  street  paving  and  repair,  sewer  oonstniction  and 
maintenance,  motor  equipment  and  repairs,  fuel  supplies,  and 
Gn  Queens  and  Richmond)  supplies  necessary  for  street-cleaning 
activities.  All  stationery  and  printed  suppUes  used  by  the 
Borough  Presidents'  (^ces  are  secured  tlmnigh  the  Boaid  ol 
City  Record. 

In  Manhattan,  responsibility  is  divided  between  two  purchasing 
oflfices.  All  contracts  involving  an  expenditure  of  $1,000  and 
over  are  handled  by  the  auditor.  All  open  market  ordere  for  less 
Aan  $1,000  are  in  charge  of  the  purchasing  agent,  who  is  respon- 
mble  to  the  Deputy  Conmiissioner  of  Public  Works.  The  pur- 
chasing agent,  with  an  assistant  and  a  stenographer,  during  1926, 
handled  open  market  orders  amounting  to  $305,000.  The  total 
contracts  awarded  by  the  auditor  amounted  to  $8,536,000. 

Purchaang  for  the  President's  office  in  Brooklyn  is  more  decen- 
tralized than  in  Manhattan.  The  principal  buyer  is  the  chief 
clerk  of  the  bureau  of  buildings  and  offices,  but  he,  like  the  pur- 
chasing agent  in  Manhattan,  is  ocnicemed  only  with  open 
market  orders.  His  purchases  of  fud  and  other  maintenance 
supplies  for  the  public  buildings  totaled,  in  1926,  $750,000. 
Highway  materials  amounting,  in  1926,  to  $231,000  were  bought 
independently  by  the  bureau  of  highways;  sewer  supplies,  amount- 
ing to  $9,500,  were  handled  by  the  bureau  of  sewers;  motor 
vehicle  equipment  and  repairs,  totaling  $59,750,  were  purchased 
through  the  auditor  of  public  accounts. 

Open  niarket  purchases  in  Queens  are  made  by  the  purchasing 
agent,  while  contract  orders,  as  in  the  other  boroughs,  are  handled 
through  the  auditor's  office.  The  purchasing  agent  buys  for  all 
biureaus  of  the  Borough  President's  office,  including  highways, 

>  Charter,  Section  111. 


Financial  Adionistrateon:  Pubghasing  109 


sewers,  street  cleaning,  public  buildings,  office  buildings,  con- 
struction and  alteration,  and  engineering  and  topography.  He 
is  also  in  charge  of  the  14  separate  storehouses  and  storage  yards 
operated  under  the  Borough  President.  Op^  market  orders,  in 
1926,  amounted  to  $1,220,631,  while  contract  orders  awarded  by 
the  auditor  totaled  $10,688,331. 

Purchasing  has  not  been  centralized  in  any  one  office  in  either 
the  Bronx  or  Richmond.  The  Borough  President's  office  of  the 
Bronx,  in  1926,  spent  $517,205  for  supplies,  materials,  and  equip- 
ment. The  supply  expenditure  in  Richmond,  including  street 
cleanmg,  totaled  $397,995  in  1926. 

The  system  of  buying  for  the  Presidents'  offices  is  hit-or-miss. 
The  Department  of  Purdiase  is  capable  of  buying  for  the  borou^is 
the  same  supplies  which  it  now  furnishes  to  other  branches  of  the 
city  government.  The  purchasing  functions  of  the  Borough 
Presidents  would  be  eliminated  if  New  York  City  had  really 
centralised  purchasing. 

Board  qf  CUy  Record 

The  Board  of  City  Record  is  established  by  Sections  1526, 
1527,  and  1528  of  the  Charter.  The  Board  consists  of  the  Mayor, 
Comptroller,  and  Corporation  Counsd,  acting  ex  officio.  Its 
functions  are  summarized  in  the  Charter  (Section  1528)  as 
follows:  "All  printing  for  said  city  and  for  the  counties  con- 
tained within  its  territorial  limits,  including  the  printing  of  the 
CUy  Record,  shall  be  executed  and  all  stationery  shall  be  supplied, 
under  contracts,  to  be  entered  into  by  the  said  Board  of  City 
Record."  The  Board  is  thus  given  the  power  to  purchase  and 
distribute  all  printing  and  stationery  supplies,  in  addition  to 
publishing  the  City  Record,  the  city's  official  daily  newspap^. 

Tlirough  the  action  of  other  confficting  charter  provisions  or 
of  special  laws,  the  following  agencies  of  the  city  buy  their 
printing  and  stationery  supplies  independently:  Department  of 
Education,  Board  of  Elections,  College  of  the  City  of  New  York, 
Himter  College,  Board  of  Transportation,  Transit  Conmiis- 
sion.  Board  of  Water  Supply,  and  the  supreme  courts,  museums, 
and  libraries. 


110  Nbw  York  Cmr's  Finangbs  and 


The  work  of  the  Board  is  carried  on  by  the  Supervisor  and 
Deputy  Supervisor  of  the  City  Record  and  37  employees.  The 
budgets  for  1926  and  1927  were: 

IWnal  senrioe  $86,067  $88,828 

OUi^  than  pencmal  service   7,88S  4,185 

$93,952  $93,013 

The  Board  of  City  Record  is  given  a  yearly  lump  sum  appro- 
priation for  publishing  the  Cily  Record,  and  for  purchasing  and 
distributing  the  necessary  stationery  and  printing  suppKes. 
Charges  are  made  to  this  fund  when  supphes  are  deUvered.  In 
addition,  separate  appropriations  are  set  up  for  printing  Public 
Health  EducaHon,  bulletin  of  the  Health  Department,  and 
for  the  stationery  supplies  needed  by  the  county  offices  in  each  of 
the  five  counties.  The  1927  budget  appropriation  to  the  Board 
was  as  follows: 

City 

Printing,  stationery,  blank  books,  publication  of  City  Baoord  ,  $1,313,000 


Plintiiig,  PMic  HeaUh  Education   13,000 

Counties 

Purchase,  storage,  and  distribution  of  stationery  and  supplies, 
county  offices  and  courts  other  than  the  supreme  courts 

New  York   $40,000 

Bronx  .    .    :   17,000 

Kings   35,000 

Queens   12,500 

Richmond   5,000 


Total  $1,435,500 


New  York  is  the  only  city  with  a  separate  organizatioii  for  the 
procurement  of  printing  and  stationery.  Centralized  purchasing 

would  confine  the  function  of  the  Board  of  City  Record  to  publi- 
cation of  the  City  Record  and  the  supervision  of  all  official  adver- 
tising for  the  city.  All  city  and  county  offices,  except  the  Depart- 
ment of  Education,  would  then  obtain  their  stationery  through 
the  Department  of  Purchase.  There  seems  to  be  no  valid  reason 
why  the  supreme  courts  and  certain  other  governmental  units 
should  continue  to  buy  their  printed  suf^lies  independently. 


Financial  Administbation:  PuBCHASiNa  111 

Bureau  of  Supplies  of  the  Department  of  Education 

Prior  to  1917,  the  Bureau  of  Supplies  and  the  office  of  Superin- 
t^dent  of  Supphes  had  been  created  undw  the  authority  of 
Sections  1075  and  1076  of  ihe  Charter.  These  sections,  however, 
were  repealed  by  Chapter  786  of  the  Laws  of  1917,  which,  under  a 
general  grant  of  powers  applying  to  all  cities,  permits  boards  of 
education  "to  purchaae  and  furnish  such  i^iparatus,  mapSi  c^obes, 
books,  furniture,  and  other  equipment  and  supplies  as  may  be 
necessary  for  the  proper  and  efficient  management  of  schools 
.  .  .  "  and  "to  provide  text  books  and  other  supphes  to  all  the 
children  attending  the  schools." 

The  Bureau  buys  all  books,  supplies,  fud,  scientific  apparatus 
and  equipment  for  the  school  system  of  the  city  with  the  exception 
of  furniture  installments,  replacements,  and  repairs,  which  are 
furnished  through  the  Bureau  of  Construction  and  Maintenance. 
The  Bureau  handles  all  postage  stamps  used  by  school  officials, 
and  all  bus  and  trolley  tickets  needed  for  transporting  pupils. 
Each  of  these  two  items  totals  about  $70,000  per  year. 

Himter  College  and  the  College  of  the  City  of  New  York,  al- 
though a  part  of  the  educational  ^t^  of  the  dty,  buy  itmr 
supphes  independently.  The  Manhattan  Trade  School  for  Girls, 
a  self-supporting  institution,  uses  the  official  lists  and  contracts 
of  the  Bureau,  but  buys  independently. 

The  Bureau  is  headed  by  the  Superintendent  and  the  D^uty 
Superintendent  of  Supplies.  It  has  a  total  of  218  anployees. 
Its  budget  for  1927  totals  $525,530,  of  which  $446,354  is  for 
personal  service,  and  $79,176  for  service  other  than  personal, 
including  supphes.  This  force  is  necessarily  larger  than  that  of 
the  Department  of  Purchase  because  it  is  a  complete  supply  unit, 
receiving,  examining  and  redistributing  the  goods  it  buys.  The 
Department  of  Purchase  has  been  described  as  merely  a  price- 
getting  office. 

During  ld25,  the  total  expenditures  of  the  Bureau  oi  Supplies 
amounted  to  $5,741,274.  In  addition,  the  school  system  spent 
$3,357,034  for  furniture  and  equipment  through  the  Bureau  of 
Construction  and  Maintenance. 

The  task  of  purchasing  for  the  city's  educational  gfystem  is 


112 


Nsw  YoBK  Citt's  Finangbs  and 


in  itsdf  vast  encNigh  for  one  office.  The  DQ>artment  of  Education 
maintains  over  700  school  buildings,  and  receives  supplies  at 
more  than  800  delivery  points.  The  Department  is  also,  to  a 
considerable  degree,  financially  independent  of  the  central  govern- 
ment. This  constitutes  a  further  argumoit  for  a  separate  supply 
bureau.  Hie  Bureau  of  Supplies  functions  with  marked  effective- 
ness. It  is  capably  administered,  and  unquestionably  reduces 
supply  costs  by  thousands  of  dollars  annually.  The  cost,  in  1925, 
for  all  books,  supplies,  equipment,  and  instruction  materials, 
was  only  one  cent  per  daUy  attendaoioe  of  a  pupil  in  the  grades, 
and  two  and  one-half  cents  per  pupil  in  high  schools.  The  Bureau 
might  well  purchase  for  Hunter  Collie  and  the  College  of  the 
City  of  New  York. 

Other  Ptarchasing  Agencies 

Several  other  departments  of  the  city  maintain  purchasing 
oflaces.  The  American  Museum  of  Natural  History  has  a  pur- 
chasing a^t  and  storekeeper  with  a  staff  of  assistants.  The 
D^Murtmmts  of  Public  Markets,  Correction,  Public  Welfare, 
Plant  and  Structures,  and  Water  Supply,  Gas  and  Electricity 
maintain  their  own  purchasing  corps,  although  their  supply 
expenditures  must  clear  through  the  Department  of  Purchase. 
In  fact,  the  Department  of  Public  Welfare  had  a  budget,  in 
1926,  of  $47,418  for  the  purchase,  and  $93,241  for  the  storage 
and  distribution,  of  medical  and  surgical  supplies. 

PuBGHAsiNO  Methods 
DeternUning  Beqmrementa  qf  the  Using  Agencies 

For  budget  making  piuposes,  all  using  agencies  are  required 
to  submit  lump  sum  estimates  of  their  requirements  for  the  next 
fiscal  year.  Detailed  estimates  are  not  submitted  in  advance  of 
actual  need.  Requisitions  for  the  suppUes,  materials,  and  equip- 
ment as  needed  are  sent  to  the  respective  buying  offices.  The 
Bureau  of  Supplies  of  the  Department  of  Education  keeps  ac- 
curate consumption  reoords  for  past  years,  dasEofied  by  com- 
modities and  also  by  individual  using  agencies.  It  is  thus  en- 


FiNANCiAL  Administration:  Purchasing  113 


abled  to  estimate  with  a  fair  degree  of  accuracy  the  total  quan- 
tities of  each  article  to  be  needed  for  the  year,  and  accordingly 
to  enter  into  contracts  without  consulting  each  individual  using 
branch  or  school.    The  contracts,  based  on  estimated  total 

quantities,  may  be  increased  or  decreased  according  to  actual 
need. 

Hie  Board  of  City  Record  also  ke^  accurate  consumption 
records  of  each  article  of  stationery  used  by  each  departmmt 

and  office  of  the  city  government.  But,  unlike  the  other  buying 
offices,  the  Board  receives  detailed  estimates  of  needs  for  the 
entire  fiscal  year.  The  contracts  are  awarded  for  definite  total 
quantities,  a  necessary  procedure  in  the  purchase  ot  printing. 

The  Department  of  Purchase  receives  annual  estimates  for 
coal;  quarterly  estimates  for  non-perishable  staple  articles;  and 
monthly  estimates  for  perishable  foodstuffs.  The  quarterly  esti- 
mates are  submitted  two  months  in  advance  of  the  required 
delivery  date.  The  monthly  estimates  are  filed  in  the  current 
month  for  delivery  on  the  first  of  the  following  month.  The 
Department  of  Purchase  cannot  anticipate  requirements  and 
thereby  take  advantage  of  favorable  market  conditions,  because 
it  has  no  contact  with  store  records  and  no  account  of  stocks  on 
hand  in  individual  departments.  In  all  cases  the  Department  of 
Purchase,  before  proceeding  to  buy,  must  wait  until  requisitions 
are  received.  It  should  have  authority  to  secure  estimates  at  any 
time  and  to  advise  the  individual  departments  and  offices  to 
order  in  advance  of  need  when  prices  and  markets  are  favorable. 

The  Borough  Presidents'  offices,  generally  speaking,  buy  noth- 
ing until  requisitions  are  rec^ved,  and  make  no  attempt  to  profit 
by  favorable  market  conditions. 

Standardization 

Standardisation  is  essential  to  the  success  of  centralized  pur- 
chasing.  "Without  some  degree  of  standardization,  centralized 

purchasing  results  in  the  placing  of  many  small  orders  throu^ 
one  office.  As  long  as  each  using  office  may  demand  and  receive 
its  own  particular  brand  or  variety  or  style,  it  is  impossible  to 
consolidate  requirements  of  individual  departmoits  into  large 


114  New  York  City*s  Finances  and 


orders.  Furthermore,  standardization  is  an  adjunct  to  careful 
and  sdeiitific  inspection.  Unless  definite  standards  are  agreed 
upon  and  enforced,  vendors  often  cannot  be  compelled  to  deliver 

exactly  what  was  purchased. 

In  1910  a  commission  on  standardization  of  supplies  was  set 
up  und^  the  supervision  of  the  Board  of  Estimate  and  Appor- 
tionment. In  1913  the  Board  made  it  a  regular  bureau  under 
the  name  of  the  Bureau  of  Standardization  of  Supplies  and 
Equipment.  This  agency  was  merged  with  the  Board  of  Purchase 
when  the  latter  was  estabhshed  in  1919. 

The  Bureau  of  Standardization  of  Supplies  and  Equipment 
divided  the  city's  purchases  into  the  following  forty-two  classes, 
which  are  still  effective  and  are  the  basis  today  for  apportionment 
of  responsibihty  among  the  various  buyers  in  the  D^iartment  of 
Purchase: 

1.  Apparatus  (laboratory,  etc.) 

2.  Arms  and  supplies,  ammunition  and  explosives 

3.  Athletic  goods  (incduding  games,  toys,  etc.) 

4.  Books,  publications,  etc. 

5.  Qeaning  materials  and  compounds 

6.  Cleaners'  machines  and  suppUes 

7.  Clothing,  etc. 

8.  Cordage,  rope  and  oakum 

9.  Drafting  and  engineering  tools,  instruments  and  suppUes 

10.  Drugs,  chemicals,  etc. 

11.  Dry  goods,  notions,  etc. 

12.  Electrical  fixtures  and  suppUes 

13.  Fire  apparatus  and  apphances 

14.  Food  products 

15.  Forage  (including  all  good  for  animals) 

16.  Fuel  (including  fuel  oils) 

17.  Furniture  and  furnishings  (including  kitchen  supplies  and 
utensils) 

18.  Hardware  (not  otherwise  classified) 

19.  Hois^ital  supplies  and  surgical  instruments 

20.  Iron,  steel,  and  other  metals  (induding  castings) 

21.  Leatiier,  saddlery,  belting,  hose  and  hose  fittings 

22.  live  stock,  (including  horses  and  aU  otiier  animals)  and 
laboratory  specimens 

23.  Machinery  and  parts  (not  otherwise  specified) 


Financial  Administration:  Pubchasing  115 


24.  Materials  of  construction  (including  Imnber,  timber,  and 
building  material) 

25.  Materials  for  manufacture  of  prison  goods 

26.  Miscellaneous 

27.  Nails,  bolts,  nuts,  washers,  rivets,  and  screws 

28.  Nautical  suppUes  (including  boats  and  equipment) 

29.  Office  equipment  (other  than  furniture),  mipphes,  and 
stationery 

30.  Oils  (lubricating  and  illuminating),  greases,  and  all 
lubricants 

31.  Paints,  oils,  varnishes  and  painters'  supplies 

32.  Pipe,  valves,  and  pipe  fittii^ 

33.  Photographic  materials  and  suppUes 

34.  Plmnbers',  steamfitters',  and  machinists'  suppUes 

35.  Printed,  Uthographed,  engraved,  and  bound  books  and 
forms 

36.  Rubber  goods  (not  otherwise  classified) 

37.  Stable  equipment  and  supplies 

38.  School  supplies  (not  otherwise  classified) 

39.  Seeds,  plants,  shrubs,  trees,  etc. 

40.  Tools  and  implements 

41.  Vehicles  (including  automobiles,  trucks,  wagons,  carts, 
carriages,  bicycles  and  motorcycles) 

42.  Wire  rope  and  wire 

Although  this  Bureau  succeeded  in  formulating  over  1,600 
iqiecifications,  these  covered  not  more  than  five  per  cent,  of  the 
different  commodities  used  by  the  city.  The  work  irf  the  Bureau 
of  Standardization  is  being  partially  carried  on  by  a  staff  member 
of  the  Department  of  Purchase.  It  is  naturaUy  impossible  for 
one  individual  adequately  to  perform  this  duty;  consequently, 
few,  if  any,  additions  or  revisions  have  hem  made.  Practically  all 
of  the  specifications  of  the  United  States  Government,  as  they 
are  issued,  are  adopted  wholly  or  with  modifications;  in  many 
cases  tiiey  supersede  the  city's  old  standards.  Specifications  are 
sometimes  diiwn  up  by  the  Department  of  Purchase  or  by  tiie 
engineering  staff  of  the  individual  buying  office  concOTied,  to 
cover  an  item  not  previously  purchased.  If  no  specification  is 
available,  purchases  are  made  wherever  possible  on  sample. 
Standard  samples  are  kept  in  a  special  sample  roam  in  the 
Department  of  Purchase  and  in  the  Bureau  of  SuppUes  of  the 


116 


New  York  City's  Finances  and 


Department  of  Education  for  the  assistance  of  the  inspectors 
and  the  testing  laboratories  in  checking  deliveries.  Such  a 
i^jrstem  permits  the  using  departments  sometmes  to  plead  the 
lack  of  specifications  as  an  excuse  for  buying  by  sample  the  product 
of  a  favored  vendor. 

New  or  revised  specifications  must  be  adopted  by  the  Board  of 
Estimate  and  Ai^rtionma[it  before  use.  Alter  adoption,  the 
use  of  standard  specifications  is  made  mandatory  by  a  resolution 
of  the  Board  incorporated  in  the  annual  budget  as  follows: 

"In  so  far  as  practicable,  all  contracts  and  open  market 
ordars  for  purchases  to  be  charged  against  such  appropriation 
shall  be  based  upon  specifications  which  are  definite  and  cer- 
tain as  to  character  and  quality,  and  which  conform  with 
standard  specifications  for  the  various  classes  of  supplies, 
materials,  fuel,  and  forage  already  approved  or  hereafter  to 
be  approved  by  this  Board. 

''That,  in  so  far  as  such  standard  specifications  may  be  estab- 
Hshed  by  this  Board,  the  Comptroller  at  the  time  of  certifying 
to  the  sufficiency  of  appropriations  out  of  which  such  contracts 
are  to  be  paid,  shall  also  certify  that  the  specifications  for  such 
supplies  or  materials,  fuel  or  forage  or  other  articles  for  which 
standard  specifications  have  been  prescribed,  are  in  conform- 
ance with  such  standard  specifications. 

"That  all  open  market  orders  issued  by  any  department  for 
suppUes  and  materials,  for  which  standard  specifications  shall 
have  been  prescribed,  shall  contain  a  description  of  the  goods 
ordered,  conforming  with  such  standard  specifications. 

'That  the  Comptroller  shall,  in  auditing  claims  for  goods 
ddivaned  on  open  market  orders,  determine,  through  inspec- 
tion or  otherwise,  whether  the  goods  delivered  conform  to 
mdk  standard  E^edfications."  ^ 

The  ^cpanding  service  of  the  city  constantly  creates  need  for 

new  specifications.  Existing  specifications  should  be  revised  and 
kept  up  to  date  to  meet  changes  in  manufacturing  and  distribut- 
ing practices.  Many  of  the  city's  standard  specifications  are 
obsolete.  Hie  city  is  the  loser  when  a  qiedficatkii  is  too  rigid, 
and  requires  special  manufacture  or  higher  quality  than  necessary. 
It  is  equally  the  loser  when  the  specification  is  too  lax  and  permits 

^  1937  budlipet,  p.  8. 


Financial  Administration:  Pubchasing  117 

the  substitution  of  articles  of  inferior  quality.  Purchase  by 
trade  brand  or  sample,. often  necessitated  by  the  lack  of  specifi- 
cations, is  likely  to  stifle  competition.  The  Department  of  Pur* 
chase  should  have  a  staff  technically  trained  in  specification 
drafting  to  cooperate  with  the  using  departments  in  the  revision 
or  formulation  of  standards. 

Purchase  Negotiatum 

The  procedure  for  soliciting  and  recriving  bids  and  awarding 
contracts  is  prescribed  by  Section  419  of  the  Charter,  and  applies 
uniformly  to  all  buying  agencies  of  the  city.  One  thousand 
dollars  is  established  as  a  dividing  line  betwem  open  market  and 
contract  orders.  All  orders  involving  an  expenditure  of  over 
$1,000  may  be  awarded  only  on  a  formal  contract  after  advertis- 
ing for  bids,  ^'unless  otherwise  ordered  by  vote  of  three-fourths  of 
the  m^bers  elected  to  the  Board  of  Aldermen.''  AU  orders  in- 
volving less  than  $1,000  may  be  purchased  in  the  "open  market" 
without  advertisement. 

The  Board  of  Aldermen  is  very  willing  to  exempt  orders 
amounting  to  over  $1,000  from  advertising  and  pubUc  letting 
upon  request  from  a  using  department.  In  fact,  such  requests 
are  seldom  disapproved.  During  January  and  February,  1926, 
the  Board  of  Aldermen  granted  exemptions  which  totaled 
$338,520.^  Some  of  these  requests  were  undoubtedly  justified. 
The  city  can  often  benefit  from  prompt  purchase  in  the  open 
market  by  waiving  the  delay  and  formality  of  advertising  and 
public  letting.  But  the  Board  of  Aldermen  frequently  grants 
such  requests  when  they  are  not  accompanied  by  satisfactory 
statements  establishing  the  need  for  open  market  purchase. 

Advertising  for  bids  on  all  contract  orders  is  in  theory  centra- 
lized in  the  Board  of  City  Record,  for  the  Charter  (Section  419) 
provides  that  pending  purchases  shall  be  advertised  in  the  City 
Record  for  at  least  ten  days  before  the  date  of  award  (11  days  if 
delivery  is  to  be  made  in  Brooklyn).  At  present,  however,  the 
Board  handles  less  than  25  per  cent,  of  the  total  advertising 
required  by  law.  The  Board  of  City  Record  has  no  jurisdiction 

» For  the       192S  the  amoimt  WIS  $1,907,207. 


118 


New  Yobx  Cmr's  Financbs  and 


whatever  over  the  legal  notices  the  city,  county,  and  surrogate 
courts,  or  the  legal  notices  and  contract  advertisements  of  the 
Board  of  Elections,  the  Board  of  Water  Supply,  Transit  Commifi- 
mon,  or  the  Mayor's  Office.  These  agendes  may,  or  may  not, 
as  they  see  fit,  use  the  City  Record  as  an  advertising  medium. 

It  would  seem  wise  to  centralize  in  the  Board  of  City  Record 
the  responsibility  for  all  legal  advertisements.  Economies  could 
be  effected  by  its  staff,  the  members  of  which  are  trained  in  re- 
ducing an  advertisement  to  the  smallest  possible  compass.  The 
annual  lump-sum  appropriation  of  $180,000  now  given  the 
Board  for  advertising  in  outside  publications  should  be  increased 
to  include  the  separate  appropriations  now  made  for  the  same 
inirpoBe  to  the  Board  of  Elections,  the  Department  of  Education, 
etc.  The  cost  of  publishing  the  City  Record  during  1926  was 
approximately  $420,000;  only  one-twelfth  of  this  cost,  or  $35,000, 
can  be  charged  to  advertisements.  Yet  the  advertis^ents  alone, 
if  carried  in  outside  newspapers  at  the  prevailing  rate,  would  have 
cost  the  city  over  one  million  dollars.^ 

On  contract  orders  in  1925  the  Bureau  of  Supplies,  of  the  De- 
partment of  Education,  s^t  out  about  4,000  direct  requests  fot 
bids,  to  supplement  newspaper  advertisem^ts.  The  Depart- 
ment of  Purchase  sends  post  card  notices  to  its  mailing  list, 
stating  that  a  contract  is  pending  and  requesting  the  vendors  to 
write  or  send  for  the  specifications  and  bid  sheets.  The  Board  of 
City  Record,  on  the  othar  hand,  rdies  entirdy  on  advertisements 
in  the  CUy  Record.  The  Board  has  foimd  that  surety  companies 
stimulate  competition  as  a  means  for  increasing  their  own  busi- 
ness. It  is  believed,  however,  that  the  Board  ebould  send  out 
notices  and  requests  for  quotations  in  addition  to  the  advertise- 
ments. The  Borough  Presidents'  offices  depend  solely  upon 
advertisements  in  the  City  Record,  or  the  ''corporation  news- 
papers" in  BrooklyTi,^  to  solicit  bids  on  contract  orders.  The 
trade  papers  are,  however,  alert  and  are  the  source  of  information 
for  most  contractors. 

Open  market  orders  need  not  be  advertised  but  competition 

^  According  to  statement  of  Deputy  Siqiervisor  of  the  CUy  Record. 
*  See  CSiarter,  Section  1526. 


Financial  Adionistbation:  Pubchasing  119 


is  required  wherever  possible.  Even  patented  articles  with 
limited  supply  sources  must  be  purchased  under  rules  ^  ^permitting 
fair  and  reasonable  opportunity  for  competition"  as  prescribed  by 
the  Board  of  Estimate  and  Apportionment.^  All  gov&mmesitsl 
subdivisions  of  New  York  State  are  required  to  buy  state  prison 
products  without  competition,  in  accordance  with  Sections  182 
to  184  of  the  Prison  Law.  Prison  products  are  confined  chiefly 
to  wearing  apparel,  waste  baskets,  brushes,  brooms,  bendies,  and 
furniture.  The  Department  of  Correction  of  the  city  also  pro- 
duces and  sells  such  articles  as  towels,  drinking  cups,  brushes, 
brooms,  and  baskets.  Before  purchasing  any  commodities  which 
are  produced  in  the  prisons,  the  buy^  must  find  out  whether  or 
not  the  order  can  be  filled  by  the  Department  of  Correction.  The 
Bureau  of  Supplies,  Department  of  Education,  secures  bids 
from  commercial  dealers  and  then  asks  the  Department  of 
Ccnrrection  of  the  state  or  city,  to  meet  the  lowest  price  submitted. 
Prisons  are  thus  compelled  to  match  commercial  prices.  In 
case  the  city,  for  good  reason,  wishes  to  be  released  from  pur- 
chasing prison  products,  a  permit  to  do  so  can  be  secured  from 
the  State  Departmmt  of  Correction  at  Albany. 

All  buying  agencies  send  out  requests  for  quotations  on  open 
market  orders.  The  Department  of  Purchase,  the  Bureau  of 
SuppHes  of  the  Department  of  Education,  and  the  President's 
Office  of  Manhattan  request  quotations  from  the  entire  appro- 
priate mailing  list.  The  Borough  President's  office  in  Brooklyn 
and  Queens  solicits  bids  from  only  five  or  six  vendors  on  each 
order.  A  week  or  less  is  allowed  for  submitting  bids,  depending 
on  the  urgency  of  need  for  delivery. 

Bids  on  contract  orders  are  received  sealed,  and  must  be 
accompanied  by  cash,  surety  bond,  or  certified  check  on  a  New 
York  City  bank  for  IJ^  per  cent,  of  the  amount  of  the  bid.  De- 
posits are  recorded  by  the  buying  office  and  are  turned  over  to 
the  security  deposit  division  of  the  Comptroller's  Office.  No 
deposit  is  required  with  bids  on  open  market  orders. 

Written  open  market  bids  are  also  received  sealed.  Except  in 
the  office  of  the  Borough  President  of  Queens  they  are  not 

1  Chtrter,  Seotkm  1954, 


120 


New  Yobx  Citt's  Finances  anb 


opened  until  the  date  specified  on  the  inquiry.  In  Queens  open 
market  bids  are  received  unsealed.  Bidders  may  change  their 
quotations  after  they  are  submitted.  The  date  for  opening  the 
iMds  and  the  award  of  the  order  is  sddom  f^sedfied  on  the  request 
sent  to  the  bidder.  Although  more  in  line  with  the  prevaiUng 
practice  in  private  businesSi  this  procedure  is  unusual  in  govern- 
ment purchasing. 

Awarding  the  Order  or  Caniract 

Bids  on  contract  orders  must  be  opened  in  public,  at  the  date 
and  place  specified  in  the  advertisement,  and  in  the  preseMtt^v 
<tf  a  r^resentative  of  the  Comptroller.  As  op^ed  and  sSmBBH 
nounced,  bids  are  recorded  by  the  representative  of  the  bujdng 
office.  Bids  of  vendors  who  have  defaulted  on  previous  contracts 
or  who  are  otherwise  in  arrears  to  the  city  may  be  rejected. 
The  buying  officers  of  some  cities  are  given  greater  latitude  in  this 
roqiect.  The  city  and  county  of  San  Francisco,  for  example, 
grant  the  purchaser  of  supphes  authority  to  disqualify  for  one 
year  any  vendor  who  defaults  on  a  contract  or  whose  record 
for  service  is  unsatisfactory. 

The  Charter  requires  the  contract  to  be  awarded  to  '*the  lowest 
bidder,"  unless  the  Board  of  Estimate  and  Apportionment  by 
three-fourths  vote  rules  otherwise.  If  two  or  more  vendors 
are  tied  for  the  lowest  bid,  all  bids  are  rejected  and  the  contract 
is  readvwrtised.  Bids  are  submitted  to  the  Department  of 
Education  and  the  award  is  made  on  each  item  in  the  order. 
The  Department  of  Purchase  makes  either  item  or  class  award 
according  to  the  circumstances  of  each  order. 

If  the  lowest  contract  bid  is  less  than  f  1,000,  it  is  declared  an 
"informal  award"  by  the  Department  of  Purchase  and  is  issued 
without  contract.  All  orders,  regardless  of  the  amount,  are 
treated  as  contracts  by  the  Board  of  City  Record.  This  need- 
tossly  increases  the  work  of  the  Comptroller,  since  deposits  are 
submitted  with  all  bids.  Open  market  bids  are  opened  by  the 
Department  of  Purchase  in  the  same  way  as  contract  bids,  but  the 
Comptroller  is  not  represented  at  the  opening. 

The  Charter  (Section  420)  prescribes  ihe  handling  of  security 


Financial  Adionistbation  :  PuBGHAsma  121 


deposits  by  the  Comptroller's  Office.  Within  ten  days  after  open- 
ing of  the  bids,  deposits  are  retiu-ned  to  all  except  the  three  lowest 
bidders.  Af tw  the  successful  bidder  has  been  determined,  the 
deposits  dl  the  other  two  are  then  returned.  If  the  successful 
bidder  does  not,  within  five  days  after  notice  of  the  award,  enter 
into  a  contract  with  the  city,  his  deposit  is  forfeited,  bids  are 
readvertisedfor,  and  the  contract  isreawarded.  When  signing  the 
contract,  the  successful  bidder  must  file  with  the  Comptrollw  a 
bond  or  certified  check  on  a  New  York  City  bank  amounting  to 
30  per  cent,  of  the  contract  price  as  surety  for  his  faithful  per- 
formance. This  surety  is  returned  upon  the  satisfactory  eomph- 
Hon  of  the  c<mtract. 

Deposits  handled  by  the  Department  of  Purchase  alone  amount 
to  about  $1,000,000  a  year.  This  is  an  index  of  the  vast  amount 
of  work  devolved  upon  the  Comptroller's  Office  by  the  present 
procedure.  This  work  could  be  greatly  simplified  if  contractors 
were  allowed  to  file  blanket  surety  bonds  to  cover  all  deposits 
up  to  a  certain  total  amount  and  thus  to  eliminate  the  necessity 
for  a  separate  bond  and  deposit  with  each  bid  and  contract. 

Contracts  are  prepared  and  signed  by  the  buying  office, 
proved  by  the  Corporation  Counsel  as  to  form,  and  by  the  Comp- 
troller as  to  sufficiency  of  appropriation  balance. 

For  the  most  part  only  definite-price,  definite-quantity  con- 
tracts are  awarded  by  the  city.  The  Charts  (Section  419)  gives 
the  city  the  ri^t  to  increase  or  decrease  the  amount  of  the 
contract  by  5  per  cent.  Different  forms  of  contracts  are  used 
in  other  cities.  Boston  sometimes  uses  a  form  whereby  the 
city  is  given  the  benefit  of  any  price  decline  during  the  lif e  of  tiie 
ccmtract.  This  provision  appears  in  the  contract  for  textbooks 
bought  by  the  Department  of  Education,  but  does  not  apply  to 
other  commodities.  St.  Louis  contracts  for  commodities  on  the 
basis  of  a  certain  discount  from  the  prevailing  market  price 
at  the  time  of  delivery.  Some  cities  enter  into  continuing  agree- 
ments which  permit  them  to  renew  the  contract  at  the  end  of  the 
contract  period  at  the  same  price. 

Nine-tenths  of  all  purchases  by  the  Bureau  of  Supplies,  Depart- 
ment of  Education,  are  on  yearly  contracts.  The  official  list  of 


122  Nsw  YoBK  Cmr's  Financbb  anp 


textbooks  is  agreed  upon  every  five  years  by  the  Board  of  Superin- 
tendents. The  contract  is  awarded  for  five  years,  renewed  for 
four  years,  then  three  yearsi  etc.  Special  contracts  are  awarded 
on  each  of  the  various  classes  of  supidies.  Contracts  are  arranged 
80  that  the  work  of  the  office  is  evenly  distributed.  Ten  per  cent, 
of  educational  piu-chases  through  the  Bureau  of  Supplies  are  made 
on  a  non-contract  basis.  This  covers  itexns  on  which  competition 
is  limited  or  impossible.  The  total  eaqMnditures  in  the  f oregcnng 


rz 

amounted  in  1925  to  $454,000. 

All  open  market  orders  handled  by  the  Department  of  Pur- 
chase  are  actually  issued  and  sent  to  the  vendor  by  the  using 
depaitm^t.  If  prices  secured  are  unsatisfactory  to  the  user, 
the  Department  of  Purchase  must  resolicit  bids  and  reaward  the 
order.  The  open  market  order  is  prepared  by  the  Department  of 
Purchase,  signed  by  the  secretary,  forwarded  for  the  signatures 
of  the  departmental  chief  and  auditor,  and  thmoe  goes  to  the 
vendor.  A  copy  of  the  order  is  sent  to  the  inspection  division  of 
the  Finance  Department  for  checking  deliveries  and  claims. 

By  this  plan  the  Department  of  Purchaae  is  merdy  a  price 
getting  ag^cy.  The  contract  witii  the  vendor  and  tihe  responsi- 
bility for  the  purchase  are  divided  between  the  Department  of 
Purchase  and  the  using  department.  This  may  facilitate  con- 
nivance between  the  vendor  and  the  individual  using  depart- 
ment. The  laltor  may  reject  the  order  whoi  it  comes  throu^from 
the  Department  of  Purchase  for  signature,  on  the  pretext  of  an  un- 
satisfactory price,  notify  a  favorite  vendor  of  the  price  stated  on 
the  order,  and  enable  him  to  compete  for  the  order  when  it  is 
readvertised  and  reawarded  by  the  D^sartment  of  Purchase. 
Thus  responsibility  for  both  contract  and  open  market  orders  is 
not  centered  in  the  Department  of  Purchase.  If  responsibility 
were  centered,  there  would  be  no  excuse  for  separate  departmental 
buying  offices. 

All  responsibility  for  following  up  orders  and  securing  timely 

deliveries  now  rests  with  the  receiving  departments.  Many 
cities  make  the  piurchasing  agency  responsible  for  securing  de- 
livery. This  seems  more  logical.  The  supplier  will  more  quickly 


Financial  Adionistbation:  PuBC«AsiNa  123 


heed  a  notice  or  telephone  call  if  it  comes  directly  from  the 
office  which  will  issue  future  orders. 

Auddt  and  Payment  of  Claims 

The  Charter  (Section  149)  provides  for  a  "pre-audit**  of  con- 
tract expenditures  by  the  Comptroller  who,  when  approving  the 
contract,  encumbers  the  appropriations  concerned,  thus  insuring 
funds  for  payment.  Open  market  orders  carry  the  certification 
of  the  auditor  of  the  issuing  departmmt  that  appropriation 
balances  are  adequate.  If  the  departmental  auditor  authorizes 
an  expenditure  in  excess  of  the  available  balance,  the  Comp- 
troller could  refuse  to  approve  the  resulting  claim  unless  he  could 
arrange  for  transfer  of  funds  from  some  other  appropriation 
accoimt  with  the  consent  of  the  Board  of  Estimate. 

Invoices  for  all  deliveries  are  submitted  in  quadruplicate  to 
the  receiving  department.  The  office  of  the  Borough  President 
of  Manhattan  requires  the  invoice  to  accompany  ihe  delivery  of 
goods,  for  the  convenience  of  the  recdving  clerk.  In  all  other 
cases  invoices  are  sent  directly  by  mail  to  the  receiving  office, 
which  at  once  forwards  a  copy  to  the  Division  of  Inspection  of  the 
finance  Department,  as  a  notice  that  delivery  has  been,  <nr  is  to 
be,  made. 

The  Bureau  of  Audit,  Department  of  Finance,  is  given  authority 
by  the  Charter  (Section  149)  to  revise  claims  on  open  market 
(ffders  if  the  prices  are  not  ''just  and  reasonable."  This  powor 
does  not  extend  to  claims  on  contracts  since  it  is  assumed  that 
the  advertisement  for  bids  has  secured  adequate  competition. 
Furthermore,  the  Comptroller  is  not  represented  at  the  opening 
erf  open  market  bids,  but  is  a  party  to  the  awarding  of  contracts. 
Therefore,  "just  and  reasonable"  has  been  construed  by  the 
Comptroller  as  "in  accordance  with  prevailing  market  prices." 
When  any  claim  is  exorbitant,  the  Buifeau  of  Audit  revises  it 
downward  and  the  vendor  has  no  recourse  save  through  Utiga- 
tion.  A  file  of  catalogues  and  price  lists  is  maintained  to  assist 
the  Bureau  of  Audit  in  this  work.  No  other  city,  so  far  as  known, 
gives  its  Finance  Department  this  wise  but  sweepmg  power  over 
open  mariket  invcHce  prices. 


124 


Nbw  Yobx  Cirr's  Fikangis  and 


The  Bureau  of  Audit  approves  no  claim  for  payment  xmtil 
it  has  also  been  approved  by  the  receiving  department,  and 
certified  by  the  inspection  division  that  satisfactory  delivery 
has  been  made.  •  With  the  aooounting  procedure  for  the  entire 
city  centralized  in  the  Comptroller's  Office,  the  departmental 
auditing  of  claims  could  be  dispensed  with  and  invoices  could 
be  submitted  directly  to  the  Finance  Department.  Furthermore, 
the  departmental  approval  of  op&i  market  orders  could  be 
eliminated.  This  is  a  needless  step,  since  the  Comptroller  also 
encumbers  the  appropriation  upon  receiving  an  "advice  of  award" 
which  indicates  that  the  auditor  in  the  department  has  already 
done  the  same  thing.  With  purchasing  centralised  in  the  De- 
partment of  Purchase  and  accounting  control  centralized  in 
the  Comptroller,  the  purchasing  and  paying  procedure  would  be 
greatly  simplified  and  expedited.  The  city  would  also  secure 
the  discoimts  for  prompt  payment  of  claims  which  are  now  often 
lost  by  the  dday  in  approval  by  the  reodving  departments. 
There  is  the  possibility  also  that,  in  order  to  embarrass  vendors 
who  are  disliked,  some  departments  may  hold  up  the  approval 
of  claims  and  issuance  of  vouchefs.  This  serves  to  kesen  com- 
petition and  lose  the  cash  discounts. 

Ifwpedtion  of  DeUveriea 

Section  149  of  the  Charter  (by  implication)  gives  the  Finance 
D^Muiment  authority  to  inspect  all  d^veries  in  connection  with 
the  auditing  of  claims  against  the  dty.  The  inspection  division 
of  the  Bureau  of  Audit  receives  a  copy  of  every  order  issued  by 
the  buying  agencies  of  the  city,  and  a  copy  of  the  invoice  from 
the  recdving  department  in  advance  of,  or  soon  after,  ddivery. 
Inflection  is  usually  made  on  the  day  following  the  receipt  of  the 
invoice.  All  commodities  are  inspected  as  and  where  delivered. 
No  deUvery  is  supposed  to  be  used  until  it  has  been  inspected  and 
passed  by  a  representative  of  the  Finance  Department. 

The  inspectors  det^mine  whether  the  quality  and  quantity 
delivered  conform  to  the  quality  and  quantity  purchased.  The 
division  also  inspects  certain  personal  service,  such  as  bands 
hired  by  the  dty  for  park  concerts^  paradeB,  etc 


Financial  AnicnnsTaATtON:  PimcHASiNa  125 


If  the  delivery  is  found  deficient  in  quantity  or  quality,  the 
inspector  recommends  its  rejection  and  states  the  reasons  there- 
for in  his  report  on  the  inspection  copy  of  the  order.  A  report 
recommending  rejection,  signed  by  a  Deputy  ComptroUer,  is 
then  forwarded  to  the  head  of  the  receiving  department  and  a 
copy  is  sent  to  the  vendor.  The  Bureau  of  Audit  may  refuse 
payment  if  rejected  material  is  accepted  by  the  using  department. 
The  Department  of  Purchase  should  have  power  to  accept  or 
reject  deliveries  on  the  bads  of  the  ine^tor's  rq^rt  subject  to 
review  by  the  Comptroller. 

Forty-five  inspectors  are  employed  full  time.  The  division  has 
epedalists  on  lumbar,  meats,  forage,  and  foodstuffs  who  inspecit 
ddiveries  of  such  commodities  anywhere  in  the  dty.  The  rank 
and  file  of  the  staff,  however,  are  assigned  to  prescribed  geogra- 
phical zones  within  which  they  are  responsible  for  inspecting  all 
deliveries  to  all  using  agendes.  The  inipectors  are  rotated  and 
asdgned  to  new  districts  at  frequ^t  pmods.  Approximatety 
500,000  deliveries  are  inspected  yearly.  In  December  1909  it  was 
stated  that  there  were  then  over  1,300  different  points  in  the  city 
at  wiiich  supplies  were  reodved.  The  number  now  is  probably 
much  greats.  This  faet  alone  shows  how  difficult  it  is  for  the 
present  inspection  staff  of  the  Finance  Department  to  examine  all 
deUveries. 

Certain  delivery  points  in  outlying  sections  report  that  weeks, 
or  months,  elapse  between  vidts  of  the  finance  inspectcHS.  It  is 
necessary,  consequently,  to  use  without  inspection  the  supplies 
which  are  badly  needed  or  which  are  perishable.  The  inspectors 
must  then  accept  the  word  of  the  receiving  clerk  that  satisfactory 
deliyary  has  been  made.  For  the  Education  Department  the 
finance  inspectors  examine  only  meats  and  foodstuffs;  all  othw 
deliveries  are  examined  by  the  staff  of  fifteen  inspectors  attached 
to  the  Bureau  of  Supplies.  The  Department  of  Purchase  has 
twdve  ini^>ectors  who  examine  all  deliveries  of  foodstuffs  for 
the  mayor's  departments.  Several  other  departmmts  ^diidi  are 
large  users  of  supplies,  material  and  equipment,  have  their  own 
inspection  staff  on  account  of  the  inabihty  of  the  Finance  De- 
pertmeat  adequatdy  to  perform  the  function.  The  Board  <rf 


126 


New  Yobk  Cirr's  Finances  and 


City  Record  maintains  an  inspector  of  printing  and  stationery 
at  its  central  delivery  point  on  Worth  Street.  An  inspector  from 
the  Finance  Department  is  also  on  full  time  duty  at  the  same 
idaoe,  fulfilling  the  same  function.  This  illustrates  the  duplica- 
tion of  effort  resulting  from  the  maintenance  of  two  staffs  of 
inspectors  to  do  the  work  of  one.  The  city  loses  an  indeterminate 
but  considerable  amount  in  lessened  competition  resulting  from 
tim  present  diversification  in  interpreting  and  applying  specifi- 
cations by  the  different  inspection  forces.  A  deUvery  acceptable 
to  one  department  may  be  rejected  by  another,  or  vice  versa. 

Ite^)on8ibility  for  inspection  of  ail  deliveries  should  rest  with 
the  Finance  D^Murtment.  New  York  City,  with  its  present 
array  of  delivery  points  and  its  decentralized  stores  system, 
should  continue,  it  is  believed,  a  check  on  deliveries  by  this 
independent  and  impartial  office.  The  departmental  inspection 
staffs  should  be  abolished  and  the  best  qualified  im^)ectox8 
should  be  transferred  to  the  finance  Department  in  such  number 
that  the  inspection  division  can  satisfactorily  perform  its  task. 

Testing 

The  central  testing  laboratory  at  125  Worth  Street  was  es- 

tabUshed  in  1912  as  a  branch  of  the  Board  of  Estimate  and  Ap- 
portionment, but  since  1920  has  been  attached  to  the  Department 
(formerly  the  Board)  of  Purchase.  The  laboratory  is  manned 
by  a  diief  chemist  and  a  staff  ci  twenty-two  at  an  annual  cost 
of  $50,000  for  personal  services.  About  6,000  tests  are  made 
each  year.  The  majority  of  tests  are  of  samples  submitted  by 
the  in^)ectors  of  the  Department  of  Purchase.  Materials  for 
street  construction  and  repair  in  the  boroughs  of  Richmond  and 
Bronx  are  tested  by  the  central  laboratory;  separate  testing 
laboratories  for  this  purpose  are  operated  by  the  Borough  Presi- 
dents^ offices  in  Manhattan,  Brooklyn,  and  Queens.  The  Bureau 
of  Supidy  of  the  Education  Department  has  its  own  lfU)oratoiy. 
The  testing  laboratory  is  "central"  in  name  only. 

The  report  of  the  test  by  the  central  laboratory  is  addressed  to 
the  Department  of  Purchase  or  other  buying  agency  if  it  concerns 
a  sanqile  submitted  with  bid;  to  the  receiving  ag^cy,  if  a  samjde 


Financial  Administration  :  Purchasing  127 


of  deUvery.  In  the  latter  case,  the  report  passes  through  the 
division  of  inspection  of  the  Finance  Department,  or  the 
Department  of  Purchase,  on  its  way  to  the  receiving  agency. 
Tests  are  made  to  detmnine  compliance  with  specifications,  com- 
parison with  standard  sample  on  which  the  order  was  awarded, 
or  the  composition  and  market  value  of  the  delivery. 

Samples  submitted  with  bids  are  seldom  tested  and  only  a 
small  proportion  of  all  deliveries  is  passed  upon.  The  central 
laboratory  is  hmdicapped  by  the  inadequacy  of  its  staff.  Often 
a  month  or  more  elapses  before  a  sample  can  be  tested,  and  the 
report  made  ready.  This  causes  delay  in  purchase  if  the  sample 
is  submitted  with  the  bid,  and  delay  in  paymmt  of  the  claim,  if 
the  sample  is  of  a  delivery. 

The  central  laboratory  should  be  given  a  larger  staff  to  care 
promptly  for  all  tests  for  all  using  departments.  Departmental 
laboratories  should  be  dispensed  with,  except  those  maintained  by 
the  departments  oi  health  and  welfare  for  medical  and  pathologi- 
cal purposes.  The  testing  laboratory  should  work  closely  with 
the  standardization  division  of  the  Department  of  Purchase  in 
revising  existing  specifications  and  determining  by  test  the 
suitability  of  new  specificiations  before  ibeir  adoption;  and  with 
the  inspection  division  of  the  Finance  Department  in  determining 
quality  of  deliveries. 

Storage 

Comptroller  Prendergast's  plan  in  1913  advocated  a  central 
storehouse  to  be  in  charge  of  a  general  storekeeper  who  would  also 
have  authority  to  estabUsh  and  maintain  a  uniform  system  of 
stores  accounts  for  all  the  departments.  As  an  outgrowth  of  this 
suggestion,  the  Division  of  Municipal  Investigation  and  Statis- 
tics of  the  Finance  Department  installed  in  various  departments 
a  uniform  stores-keeping  and  accounting  system,  but  no  attempt 
has  ever  been  made  to  set  up  a  central  supervision  over  stores. 

The  Departmmt  of  Purchase  is  authorized  by  the  Charts 
''to  maintain  and  operate  .  .  .  such  storehouses  as  may  be  legally 
provided,"  but  no  appropriation  has  ever  been  made  to  establish 
a  central  storehouse  or  to  supervise  those  now  in  operation. 


128 


Nbw  Yobk  City's  Financss  and 


The  Board  of  City  Record,  as  already  stated,  has  a  omitral 

delivery  point  at  which  all  stationery  supphes  are  inspected  and 
stored,  pending  their  transfer  to  the  using  departments  in  trucks 
f^>wated  by  the  Board.  The  advantages  of  this  plan  for  a  careful 
system  of  inspection  are  obvious. 

The  Department  of  Purchase  should  have  some  jurisdiction 
over  the  departmental  storehouses  and  should  receive  annual 
inv^tories  and  periodic  reports  on  receipts,  disbursements,  and 
stocks  on  hand.  The  department  could  then  keep  consumption 
records  and  be  in  position  to  anticipate  needs  when  market 
conditions  were  favorable  for  the  purchase  of  certain  commodities. 
Certain  departmental  storehouses  which  are  especially  equipped 
for  storage  of  one  or  more  commodities  might  be  used  as  a  central 
depository  for  the  entire  city  govmunent,  as  in  the  case  of  the 
stationery  storehouse  operated  by  the  Board  of  City  Record. 

This  survey  makes  no  pretense  to  discussing  and  appraising 
the  dly's  storage  system.  Each  of  the  Borough  Presidents' 
offices  maintains  several  storehouses.  Manhattan  has  two;  one 
is  operated  by  the  Bureau  of  Highways,  the  other  by  the  Bureau 
of  Public  Buildings  and  Offices.  Queens  has  a  total  of  fourteen 
storehouses  and  storage  yards,  all  supervised  by  the  purchasing 
agent.  Complete  and  compreh^isive  storage  eyBteam  are  also 
maintained  by  the  Departments  of  Water  Supply,  Gas,  and 
Electricity,  of  Health,  of  Pubhc  Welfare,  and  several  others. 

The  Bureau  of  Supphes  of  the  Education  Department  has  four 
storehouses.  Throui^  these  pass  annually  about  four  million 
dollars  worth  of  supplies  and  equipm^t.  The  remaining 
supphes  are  delivered  by  the  vendors  directly  to  the  consuming 
branches.  This  comphcates  the  work  of  inspection^  reduces  the 
quantities  purchased  at  one  time>  and  so  tends  to  increase  the 
imit  cost.  It  is  believed  that  one  or  two  central  storehouses 
large  enough  to  care  for  all  supphes,  would  be  a  sound  investment 
for  the  city,  and  would  enable  the  present  storage  staff  to  handle 
practically  all  the  purchases  at  littie  added  overhead  cost.  The 
present  annual  expenditure  of  $61,000  for  rental  <rf  storage  space 
could  be  apphed  to  the  cost  of  the  storehouse. 

The  present  storage  cost  could  be  considerably  reduced  if 


Financial  Administration:  Purchasing  129 


all  educational  supply  funds  were  merged.  In  1925,  ninety-two 
separate  funds  were  maintained,  each  requiring  separate  stocks 
and  storage  accounts.  This  situation  speaks  for  itscdf  • 

Disposal  of  Surplus  Supplies  and  Equipmerd 

Section  1553  of  the  Charter  makes  the  Sinking  Fund  Com- 
mission the  custodian  of  surplus  property,  supphes,  and  equip- 
ment. This  function  is  carried  out  by  a  sta£  member  of  the 
divifflon  of  Municipal  Investigation  and  Statistics  of  the  Finance 
Department,  under  supervision  of  the  Comptroller. 

By  resolution  of  the  Sinking  Fund  Commission  on  April  21, 
1926,  the  Comptroller,  (a  member  of  the  Commission),  was 
given  exclusive  authority  to  supervise  such  transfers,  subject  to 
periodic  reports  to,  and  approval  by,  the  Commission  as  a  body. 

Any  department  head  who  has  on  hand  equipment  or  supphes 
which  are  surplus  or  unht  for  use,  accordingly  notifies  the  Sinking 
Fund  Commission.  If  the  estimated  value  of  such  supplies  or 
materials  is  one  hundred  dollars  or  over,  an  appraisal  and  descrip- 
tion of  such  property  is  made  by  the  Comptroller's  representative 
who  then  notifies  the  heads  of  all  departments  which  might  make 
use  of  such  property.  The  first  applicant  receives  the  prop^y 
free  of  charge.  If  no  department  enters  a  claim,  the  property 
may  be  sold.  The  value  of  such  inter-departmental  transfers  in 
1926  was  $60,000.  The  amount  has  varied  in  past  years  from 
$50,000  to  $200,000. 

Any  supplies  or  materials  which  have  become  obsolete  and  no 
longer  of  use  are  hsted  for  sale  by  the  owning  department.  Com- 
petitive bids  are  sohcited  or  a  public  auction  is  advertised  for 
five  days  in  the  City  Record.  A  transcript  of  bids  recdved  is 
forwarded  to  the  Comptroller,  who  sends  his  representative  to 
make  a  personal  investigation.  If  the  highest  bid  is  satisfactory, 
the  sale  is  made  and  the  proceeds  are  turned  over  to  the  sinking 
fund  commission,  to  be  apphed  to  the  reduction  of  the  city's 
debt.^  The  D^artment  of  Education  sells  old  furniture  at  fifty 

*  Proceeds  from  the  sale  of  old  fire  hose,  fire  engines,  etc.,  by  the  Fire  Depart- 
ment, and  of  uncalled  for  stolen  property  by  the  PoUce  Department,  are  credited 
to  the  pension  funds  of  those  departments,  as  provided  by  the  Cluurter,  Sections 
853  and  789. 


CHAPTER  V 


THE  REVENUES  OF  NEW  YORK  CITY 

The  revenues  of  New  York  City  are  greater  than  those  of  any 
governmental  unit  in  the  United  States  except  those  of  the 
federal  govemm^t  itself.  In  1926,  the  cash  receipts  of  the  city, 

exclusive  of  borrowings,  were  $496,808,497.  In  1927  they  will 
exceed  a  half  billion  dollars,  an  amount  reached  by  the  govern- 
ment of  the  United  States  only  within  a  graieration. 

The  Sources  of  Revenue 

The  receipts  of  New  York  City  exclusive  of  borrowings  may 
be  grouped  under  the  following  12  headings:^ 

1.  General  property  taxes  on  real  estate  and  tangible  personal 
property; 

2.  State  taxes  of  whidh  the  dty  receives  a  share  such  as  the 
state  income  taxes; 

3.  Fees,  licenses,  permits,  and  privileges; 

4.  Assessments  for  local  improvements  and  charges  for  speci- 
fic work  done  or  material  fumiedied  by  the  city; 

5.  Fines  and  forfeitures; 

6.  Subventions,  chiefly  from  the  state  for  the  support  of 
public  education; 

7*  Rentals,  including  markets,  docks,  ferry  and  other  fran- 
chises, and  reel  estate  rentals; 

8.  Earnings  of  public  service  enterprises,  especially  water  and 
city  owned  ferries,  trolleys,  buses,  and  subway ; 

9.  Earnings  of  general  departments  for  minor  services,  docu- 
ments, etc.; 

^For  a  lull  dtussifieatkm  of  the  city's  lesources,  see  Appendix  K. 

131 


132 


Nbw  York  City's  Finances  and 


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Financial  Administration:  Revenues 


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134 


New  Yobx  City's  Finances  and 


10.  Miscellaneous  general  earnings  as  from  bank  interest,  pre- 
miums, and  investments  other  than  those  of  the  sinking  funds; 

11.  Miscellaneous  accruals,  charges,  deductions,  and  refunds; 

12.  Sale  of  assets,  such  as  unnecessary  real  estate  and  waste 
materials. 

The  Growth  of  the  CUy'a  Revenues 

Since  1915  the  cash  receipts  of  the  city  have  grown  from  214 
milhon  dollars  to  496  miUion  dollars,  or  131  per  cent.  This 
growtii  has  been  gradual  and  persistent.  In  order  to  be  under- 
stood the  growth  must  be  analyzed.  This  is  done  in  the  accom- 
panjdng  charts  and  tables  which  are  based  upon  tables  presented 
in  the  appendix.* 

Table  I  shows  by  sources,  in  accordance  with  the  revenue 
dassification,  the  amounts  received  by  the  city  in  each  of  the 
last  three  years  compared  with  the  receipts  for  1915,  1918,  and 
1921.  It  covers  a  span  of  eleven  years  and  includes  the  period  of 
war  inflation  and  subsequent  readjustments 

The  totals  of  Table  I  for  each  general  class  of  revenues  are 
diown  graphically  in  Chart  I.  This  chart  is  drawn  on  a  ratio,  or 
logarithmic  scale,  so  that  the  upward  slant  of  a  lincy  or  of  any 
part  of  a  line  indicates  the  rate  of  increase.  From  this  chart  it 
will  be  seen  that  the  total  has  increased  at  a  steady  rate  through- 
out the  period,  though  the  rate  was  slightly  faster  between  1918 
and  1921.  The  general  property  tax,  which  furnishes  some  70 
per  cent,  of  the  city's  revenues,  has  not  increased  as  fast  as  has  the 
total.  The  two  lines,  though  abnost  paralld,  are  slightly  further 
apart  in  1926  than  they  were  in  1915,  due  chiefly  to  the  fact 
that  the  increase  of  general  property  taxes  was  not  quite  as 
rapid  from  1918  to  1921  as  was  the  imarease  fd  the  total 
revenues. 

The  lower  curves  of  Chart  I  show  the  rate  of  increase  for  each 
of  the  major  sources.  The  most  conspicuous  increase  recorded 
is  that  for  subventions,  which  rose  from  $2,526,000  in  1918  to 
|17;190^000  in  1921.   The  only  other  rapid  increases  are  for 


Financial  Administration:  Revenues  135 


CHART  I 


fm9  mi  /s» 


136 


Nxw  YoBX  Cmr's  Financss  and 


departmental  earnings  and  for  the  city's  share  of  state  taxes. 
The  increase  in  the  sales  of  assets  is  fortuitous  and  of  little 
significance  from  a  general  revenue  standpoint. 

The  percentage  increases  (av&t  the  figures  for  1915)  shown  in 
each  of  the  major  sources  of  revenue  are  set  forth  in  Table  II. 
This  gives  in  percentages  the  matter  expressed  by  the  curves  of 
Chart  1. 

TABLE  n 


Percentage  Growth  op  Revenues  by  Soubgss  oveb  Fiqubes  fob  1915' 


Booms 

1018 

im 

1024 

1025 

1028 

1.  General  property  taxes 

21.5 

65.9 

92.0 

102.1 

121.8 

2.  State  taxes  (city's  share) 

75.4 

196.3 

226.3 

279.3 

321.4 

3.  Fees,  licenses,  etc.  . 

.1 

23.8 

90.6 

129.1 

127.7 

4.  Assessments  .... 

-22. 

20.4 

27.6 

89.4 

129.1 

5.  Fines  and  forfeitures 

-26.5 

115.0 

88.3 

83.5 

122.4 

ft.  Subvoitioiis  and  dona- 

8.8 

640.4 

751.2 

792.0 

828.6 

7.  Rentals  

12.13 

83.82 

40.21 

45.5 

44.66 

S.  Eamiogs  of  public  serv- 

ice enterprises 

4.1 

28.7 

56.4 

68.8 

78.7 

9.  Earnings  of  general  de- 

partments .... 

43.9 

186.9 

315.0 

319.3 

340.5 

10.  AlisoeUaneous  genoral 

eamings  .... 

-40.3 

25.1 

6.9 

38.3 

46.8 

11.  Misoellaiieous  accruals. 

charges,  deductioDif, 

and  refunds  . 

-39.8 

-40.3 

7.6 

-31.8 

43.6 

12.  Sale  of  assets     .    .  . 

-57.8 

40.4 

100.6 

117.0 

720.1 

Total  

17.59 

71.66 

95.74 

110.20 

131.4 

Comparable  Importance  of  Revenue  Sources 

The  importance  of  the  different  sources  of  city  revenue  and 
the  percentages  of  the  total  derived  from  each  are  shown  in 
Table  lU. 

The  material  of  this  table  is  presented  graphically  in  Chart  II. 
Hiis  diagram  brings  out  a  number  of  facts  unmistakably.  In 
the  furst  place,  the  general  property  tax  is  the  backbone  of  the 

>  See  Table  1,  pp.  132  and  133. 


Financial  AnMiNismAiioN:  Revenues 


137 


TABLE  m 

Pebcsntaob  DsRBiBimoN  OF  New  Yowt  Citt's  Cash  Bacmm  waxm  Sncmm 

SouBCBS  FOB  Selected  Ybabs 


Sooacni 

1916 

1918 

1921 

1924 

AAV 

1925 

«  AAA 

1926 

1.  vienerai  property  jmjxo 

76.06 

71.10 

72.16 

70.74 

70.51 

2.  State  taxes  (city'sshare) 

4.51 

6.73 

7.79 

7.53 

8.15 

8.22 

3.  Fees,  licenses,  etc.  . 

.68 

.58 

.49 

.67 

.75 

.67 

4.  Assessments  . 

4.18 

2.77 

2.93 

2.72 

3.76 

4.14 

5.  Fines  and  forfeitures 

.40 

.25 

.50 

JO 

.35 

JO 

6.  Subventions  and  donar 

tions  .... 

1.08 

1.00 

4.66 

4.70 

4.59 

4.34 

7.  Rentals  .... 

4.41 

4.21 

3.44 

3.16 

3.05 

2.76 

8.  Earnings  of  public 

service  enterprises 

6.57 

5.81 

4.02 

526 

5.27 

5.07 

9.  Eamings  of  general 

departments 

.54 

.67 

.01 

1.15 

1.09 

1.64 

10.  Miscellaneous  general 

earnings 

2M 

1.18 

1.89 

1.41 

1.70 

LOS 

11.  MIndlaneous  accruals, 

charges,  deductions, 

and  refunds 

1.37 

.70 

.48 

.75 

.44 

.85 

12.  Sale  of  assets  .    .  . 

.11 

.04 

.89 

.11 

.11 

J3S 

Total     .    .  . 

100 

100 

100 

100 

100 

100 

city's  revenue  system.    It  is  producing,  and  has  for  many  years 
produced,  70  per  cent,  or  more  of  the  total  revenues.    In  the 
second  place,  the  general  property  tax  is  now  bearing  a  slightly 
smaller  proportion  of  the  total  burden  than  has  been  usual  in 
past  years.  Thirdly,  it  appears  that  only  two  important  sources 
of  revenue  show  a  marked  increase  in  the  proportion  of  the  total 
which  they  are  contributing.  These  are  the  city's  share  of  state 
taxes  and  the  subventions  received  from  the  state  for  the  pubhc 
schools.   The  only  proportionate  increase  among  the  minor 
sources  is  found  in  the  earnings  of  general  departments  which 
now  amount  to  1.64  per  cent,  of  the  total,  as  against  .54  per  cent, 
in  1915.   The  decrease  in  the  proportion  falling  upon  real  estate 
and  other  taxable  property  is  thus  to  be  attributed  aknost  entirdy 
to  the  growth  of  state  aid  for  schools  and  to  the  development  <rf 
the  state  taxes  which  are  shared  with  the  city. 


138 


New  York  City's  Finances  and 


CHART  II 

Pebcentaoe  op  New  York  City's  Cash  Receipts  from  Specified  Sources 

Selected  Years  1915  to  1926 


/9/s       1918       laai      J9a4  /9£5  /aas 


Note:  This  chart  indicates  the  relative  importance  of  the  different  sources  for 
certain  specified  years.  It  will  be  noticed  that  the  apadng  from  left  to  right  does 
not  correspond  accurately  with  the  time  int^ryali. 


Financial  ADioKismAiiioN:  REvsmTBS  13d 


Real  Property  Taxes 

The  property  tax,  which  produces  70  per  cent,  of  the  city's 
revenues,  is  in  reaUty  a  tax  on  real  estate.  Personal  property 
has  all  but  disappeared  from  the  tax  rolls.  It  now  represents  but 
2  per  cent,  of  the  total  roll  as  is  seen  bdow. 

The  Tax  Burden  of  the  Boroughs 

In  considering  the  real  estate  tax  it  is  more  satisfactory  to 
deal  with  assessed  values  and  tax  rates  than  with  receipts  because 
receipts  are  confused  with  discounts,  back  taxes,  or  ddinqurades. 

table  IV 


AflfiiTraagn  VALUES  OF  ReAL  EsTATE  BY  BoBOUGHS,  1905  TO  1927 

(In  millions  of  doUais) 


Ybab 

Manhattan 

Bbookltn 

Bronx 

Richmond 

Total 

1905 
1906 
1907 
1906 
1909 

3,820.7 
4,105.3 
4,391.9 
4,584.5 
4,614.4 

941.0 
1,072.0 
1,181.2 
1,335.0 
1,354.8 

140.4 
159.4 
217.7 
296.4 
306.1 

274.8 
356.8 
396.7 
441.2 
462.7 

44.6 
46.9 
62.9 
66.3 
67.1 

5,221.5 
5,738.4 
6,240.4 
6,722.4 
6,807.1 

1910 
1911 
1912 
1913 
1914 

4,743.9 
5,037.8 
5,035.4 
5,126.9 
5,149.2 

1,404.0 
1,689.3 
1,675.0 
1,680.0 
1,671.1 

334.5 
446.5 
456.7 
477.8 
488.7 

493.8 
605.2 
616.4 
640.3 
656.7 

67.9 
80.0 
78.3 
81.6 
82.1 

7,044.1 
7,858.8 
7,861.8 
8,006.6 
8,049.8 

1915 
1916 
1917 
1918 
1919 

5,145.8 
5,129.8 
5,088.3 
5,094.6 
5,115.8 

1,691.9 
1,752.4 
1,790.9 
1,826.8 
1,865.1 

509.5 
539.4 
569.9 
591.6 
604.8 

677.1 
698.8 
714.2 
726.1 
731.8 

84.4 
87.4 
91.2 
100.6 
110.8 

8,108.7 
8,207.8 
8,254.5 
8,339.6 
8,428.3 

1920 

1921 
1922 
1923 
1924 

6,186.7 

5,878.8 
6,058.6 
6,177.8 
6,402.5 

1,937.9 
2,395.5 
2,447.0 
2,536.6 
2,689.7 

636.4 
718.8 
748.6 
804.0 
904.6 

753.3 
852.4 
864.0 
926.7 
988.2 

111.8 
127.4 
131.7 
150.9 
163.8 

8,626.1 
9,972.9 
10,249.9 
10,596.0 
11,148.8 

1925 
1926 
1927 

6,721.0 
7,154.5 
7,786.1 

2,918.5 

3,230.9 
3,606.6 

1,013.6 

1,227.7 
1,483.6 

1,074.3 

1,189.2 
1,407.6 

173.9 

195.3 
257.1 

11,901.3 

12,997.6 
14,639.8 

140 


New  YOBK  CiTT's  FlHANOIS  AND 


,1' 


i! 


CHART  m 

Assessed  Values  of  Real  Estate  bt  Boboughs,  1905  to  1927 


/cpoo 


SPOO 


I 


300 


ma 


so 


/ 


Total  gy-i 

Aian/iaHan 


Breokfyn 


Bronx 


/SOS 


/9/0 


J9iS 


I    I  I 


1X7 


Financial  ADiimiamATioN:  Revenues  141 


On  the  basis  of  assessments  it  is  possible  to  record  the  comparar 

tive  growth  of  the  general  taxes  falling  upon  the  five  boroughs, 
for  the  assessed  values  are  used  as  the  basis  of  the  distribution. 
This  is  done  m  Table  IV. 

This  same  material  is  presented  in  Chart  III.^  It  will  be  noted 
that  the  most  rapid  increase  is  in  Queens  which  has  now  gone 
ahead  of  the  Bronx.  Richmond  shows  the  second  fastest  rate  of 
increase,  though  the  Bronx  is  not  far  behind.  Manhattan  is,  of 
course,  the  most  stable  boroughi  though  evm  h«re  the  increaseB 
since  1905  are  104  per  cent. 

Assessed  values  are  a  true  measure  of  the  distribution  of  the 
city  tax  burden  among  the  boroughs.  The  assessed  values  do 
not,  however,  reflect  the  comparative  tax  paymg  capacity  of  the 
property  of  the  boroughs  because,  as  is  generally  and  officially 
admitted,  the  ratio  of  assessment  is  different  in  the  different 
boroughs.  No  allowance  is  made  for  this  fact  in  the  apportion- 
ment of  city  taxes.  This  failure  to  assess  property  in  the  borou^ 
on  the  same  basis  or  to  equalize  the  levy  produces  a  serious  dis- 
crimination in  the  distribution  of  taxes  as  among  the  boroughs. 
For  example,  in  1927,  it  appears  that  Manhattan  is  paying  $982,- 
880  more  than  its  rightful  share  of  the  general  city  burden,  in- 
cluding city-wide  assessments,  while  Queens  is  paying  $1,541,521 
less  than  its  share.  Brooklyn  is  paying  $1,450,187  too  much,  the 
Bronx  $624,413  too  Uttle,  and  Richmond  $267,133  too  little. 
These  computations  are  based  upon  the  official  data^  furnished  to 
the  State  Tax  Department  by  the  New  York  City  Commissioners 
of  Taxes  and  Assessments.   Table  V  presents  the  detailed  figures. 

FvJH  Values  and  True  Tax  Rates 

In  the  case  of  the  borough  of  Manhattan  it  is  possible  to 

arrive  at  an  approximate  figure  for  the  ratio  of  true  values  to 
assessed  values  as  shown  by  actual  sales,  since  these  are  gathered 
and  tabulated  weekly  by  the  Record  and  Guide.*  Sale  values 
cannot  be  takm  as  infallible  indices  of  true  values.  Nevertheless 

» See  p.  141. 

*  See  Report  of  State  Tax  Commission,  1925,  pp.  61,  63,  96. 

•  Published  by  The  Real  Estate  Board  of  New  York. 


Nsw  Y<HiK  drr's  Financm  and 


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Financial  ADMiNisxaATiON:  Ee venues 


143 


Chabt  IV 

Assessed  Valub  and  Full  Value  op  Taxable  Real  Estate  m  Manhattan 

1905  TO  1926 


I 

O 

I 


144  New  Yobx  City^s  FiNAKCBd  and 


they  are  the  best  mngle  index  available,  especially  if  a  considerable 

number  of  sales  are  examined.  Chart  IV  is  based  on  these  figures. 
It  shows  the  assessed  value  of  real  estate  in  Manhattan  by  years 
from  1905,  compared  with  the  full  value  of  real  estate  as  corrected 
by  the  sales  ratios  from  the  Record  and  Ouide.  While  the  ''full 
value"  curve  is  imdoubtedly  inaccurate  at  certain  points  because 
of  the  nature  of  the  information  upon  which  it  is  based,  it  is 
probably  substantially  correct.  It  is  based  upon  22,900  individual 
transactions  q>iead  over  the  period  of  22  years  and  involving 
considerations  totalling  over  a  billion  and  a  quarter  dollars. 
Table  VI  presents  the  basic  figures. 

What  would  the  tax  rate  in  Manhattan  have  been  each  year 
if  all  property  had  been  assessed  at  full  value?  In  other  words, 
what  was  the  true  tax  rate?  The  legal,  or  actual  tax  rate  and 
the  true,  or  corrected,  tax  rate  are  shown  on  Chart  V.  The 
figures  are  drawn  from  Table  VI.  If  one  may  accept  the  Record 
and  Guide  sales  figures  as  trustworthy,  it  appears  that  from  1905  to 
1912  the  true  rate  was  consistently  below  the  l^al  rate.  In  1910, 
for  example,  the  taxpayer  was  called  on  to  pay  $1.76  on  each 
hundred  dollars  of  assessed  value,  but,  by  and  large,  property  was 
assessed  at  only  86  per  cent,  of  its  value  so  that  the  tax  he  paid 
was  $1,517,  which  is  equivalent  to  a  tax  rate  of  1.517  on  one 
himdred  dollars  of  full  valuation.  From  1913  to  1918,  according 
to  the  Record  and  Guide  figures,  the  situation  was  reversed. 
Property  was  assessed  so  high  that  actual  values  were  less  than 
assessed  values  with  the  result  that  the  legal  tax  rate  was,  as  a 
matter  of  fact,  lower  than  the  true  tax  rate  paid.  Since  1918, 
the  pre-war  situation  has  been  reestablished.  In  spite  of  the 
rapid  increase  of  the  legal  tax  rate  up  to  1921,  and  the  increase  of 
assessments  in  Manhattan,  as  shown  on  Chart  III,  the  true  tax 
rate  has  been  consistently  below  the  legal  tax  rate  since  1919. 
The  great  decrease  since  the  high  point  of  1922,  has  carried  true 
tax  rate  to  the  lowest  level  reached  since  1914,  has  been  going 
down  since,  with  the  exception  of  the  high  point  reached  in  1922. 
This  may  appear  contrary  to  the  experience  of  property  owners 
^o  are  painfully  conscious  of  their  growing  tax  bills,  especially 
if  they  are  not  conscious  of  the  even  greater  increase  that  has 


Financial  Adhinibtration:  Revenues 


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146 


New  Yobk  City's  Finances  and 


CHART  V 

Tax  Batb  and  Tbue  Tax  Rate  on  Manhattan  Rbaii 

1905  TO  1926 


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Financial  Administration:  Rbvbnubs  147 


taken  place  in  the  value  of  their  properties.  It  must  be  empha- 
giied,  alao,  that  these  computations  are  based  on  the  general  situa- 
tion and  may  not  apply  to  individuals  who  are  adversely  affected 
by  peculiar  circumstances  or  by  mequalities  of  assessmmt.  Th© 
figures,  however,  give  a  true  view  of  the  general  situation. 

The  Record  and  Guide  figures  are  available  only  for  Manhattan. 
If  the  situation  in  the  other  boroughs  is  similar  to  that  indicated  in 
Manhattan,  it  would  appear,  therefore,  that  the  tax  burden  upon 
real  estate  is  not  so  serious  as  might  be  inferred  from  the  organized 
protests  which  have  been  heard.  The  figures  quoted  indicate  that 
real  estate  is  now  paying  a  smaller  portion  of  the  cost  of  the  city 
government  than  it  has  in  the  past.  Moreover,  the  true  tax  rate 
as  distinguished  from  the  legal  rate,  appears  to  have  decreased, 
especially  since  1922.  These  results  are  to  be  attributed  primarily 
to  the  large  inraease  which  has  recently  occurred  in  realty  values 
and  only  to  a  minor  degree  to  the  policy  of  the  state  of  New  York 
of  sharing  with  the  locaUties  the  product  of  the  new  taxes  upon 
personal  and  corporate  incomes  and  in  augmenting  state  aid  for 
public  education. 

The  Two  Per  Cent.  Tax  Limit 

All  cities  with  100,000  population  and  over  in  New  York  State 
are  by  the  State  Constitution  prohibited  from  levying  a  tax  for 
local  purposes,  exclusive  of  debt  service  on  permanent  dd>t,  in 
excess  of  2  per  cent,  of  the  assessed  value  of  taxable  real  and 
peraonal  property.  The  language  of  the  constitution  is  as  follows : 

"The  amount  hereafter  to  be  raised  by  tax  for  county  or  city 
purposes,  in  any  county  containing  a  city  of  over  one  hundred 
thousand  inhabitants,  or  any  such  city  of  this  state  m  adchtion 
to  providing  for  the  principal  and  interest  of  the  existmg  debt, 
shall  not  in  the  aggregate  exceed  in  any  one  year  two  per 
centum  of  the  assessed  valuation  of  the  real  and  personal 
estate  of  such  county  or  city,  to  be  ascertamed  as  prescribed  m 
this  section  in  respect  to  county  or  city  debt."  » 

It  should  be  noted  that  the  2  per  cent.  Umitation  does  not 
apply  to  all  items  entering  into  the  New  York  City  tax  levy.  The 

lArticfcVIII,  §10. 


148 


New  York  City's  Finances  and 


levy  for  the  interest  and  retirement  of  the  permanent  debt  is 
excluded.  The  levy  on  account  of  the  state  tax  is  excluded. 
Special  assessments  against  the  city  as  a  whole  or  against  indi- 
vidual boroughs,  under  Section  247  of  the  Charter,  are  Ukewise 
excluded.  For  the  1927  New  York  City  levy,  the  following  items 
aie  within  and  without  the  tax  limit: 

Within  the  2  per  cent,  limitation: 

For  idty,  county,  and  school  purpoBes  $283,603,809^ 

Outside  tlie  2  per  oeaat,  Umttation: 

For  state  tax   $12,622,697.53 

For  principal  and  interest  of  city  debt  97,756,554.71 

For  assessments  on  the  city  at  large    .  5,190,881.72 

For  assessments  on  boroughs    .    .    .  2,849,870.94 

Total  outside  limit  $118,420,004.90 

Total  kiry  $402,023,814.15 

It  is  these  last  four  items  which  annually  cany  the  tax  rate 
wdl  above  2  per  cent. 

This  constitutional  limitation  has  had  an  important  effect  on 
municipal  finance  in  Buffalo,  Rochester,  Yonkers,  Utica,  Syra- 
cuse, and  Albany,  all  of  which  have  found  it  difiGlcult,  and  in  some 
cases  almost  impossible  to  keep  within  the  limitation.  Many 
unsound  practices  of  evasion  have  been  developed,  especially  by 
means  of  the  issuance  of  indebtedness,  the  retirement  of  which 
does  not  fall  within  the  tax  limitation.^  Thus  far  New  York  City 
has  not  found  the  2  per  cent  limit  so  great  an  embarrassment.  In 
most  years,  the  levy  has  been  well  within  the  constitutional  maxi- 
mum, so  that  it  has  not  been  necessary  to  resort  to  devices  of 
evasion.  In  1927,  the  levy  is  only  S13, 152,629.81  below  a  full  2 
per  cent,  levy — not  a  large  margin  in  a  budget  of  half  a  billion. 
The  statistics,  however,  do  not  tell  the  whole  story,  for  the  presence 
of  that  limit  is  constantly  before  officials  in  considering  proposed 
e3q>enditure8. 

Tax  Exemption 

Twenty-three  per  cent,  of  the  real  estate  within  New  York 
City  is  tax  exempt.  This  falls  into  three  classes,  as  follows: 

^  See  die  Report  of  Special  Commieeim  on  Financinff  Bdwealkm  in  CUiee,  199$. 
(The  BO-cftlkd  Friedsam  Report),  p.  17. 


Financial  Administeakion:  Bxvbnxtbs 


149 


Pbb  Cent. 
Valttation        of  Total 

1.  PubUc  property  $2,292,328,000  60^ 

2.  Relieous,  charitable,  aod  educational  institu- 

tions, Uc.    557,873,000  14.8 

3.  Housing  exemptions   916,512,000  2A.^ 


$3,766,715,000  100.0 

Public  property  embraces  the  property  of  the  federal,  state, 
and  city  governments.  It  amounts  respectively  to  $149,095,800, 
$21,424,825,  and  $2,121,807,750.  This  last  item  includes  $855,- 
000,000  for  parks  and  $278,000,000  for  city  owned  subways, 
$246,000,000  for  docks,  and  $200,000,000  for  schools.  The 
property  of  churches,  charitable  organizations,  schools,  and 
colleges  amounted  (1925)  to  $544,314,000.  There  is  also  $13,558,- 
000  of  subway  property  exempt  under  Section  34,  Chapter  4, 
Laws  of  1891.  The  private  property  exempted  is  to  be  classified 
as  follows:  _  ^  


PxB  Cm*. 

Valuation 

or  ToTAi* 

Religious  .  <  

 $265,374,000 

45.8 

Charitable  

  162,402,000 

29.1 

Educational  

  71,347,000 

12.8 

Cemeteries  

  54,463,000 

9.8 

Transit  (private)  

  13,659,000 

2.4 

PensionNB  

  728,000 

.1 

 $567,873,000 

100.0 

Partial  eicmption  was  allowed  dwellings  completed  in  accord- 
ance with  the  provisions  of  an  ordinance  approved  Februrary 
15,  1921,  and  amended  in  1923.  This  is  authorized  until  January 
1,  1932,  by  Section  4b  of  the  Tax  Law.  About  95,000  dwellings 
completed  rince  April  1, 1920,  receive  an  exemption  which,  accord- 
ing to  the  1926  valuation,  amomits  to  $916,512,915.  All  but 
about  6,000  of  these  are  one  and  two  family  houses;  75,000  of 
them  are  in  Brooklyn  and  Queens.  This  exemption  applies  only 
to  the  building  and  not  to  the  land.  State  taxes  and  special 
assessments  are  not  affected. 

With  the  exception  of  the  housing  exemplions,  there  has  been 
no  important  change  in  the  situation  during  the  past  generation. 
Moet  of  the  pioparty  exmpt  is  dty  owned.  The  ratio  of  exempt 


160 


New  Yobx  City's  Financbs  and 


property  to  total  property  has  not  been  expanding  rapidly, 
especially  if  private  property  alone  be  considered.  Tax  exemp- 
tion of  real  estate  does  not  present  an  acute  fiscal  problem  in  New 
Yorkaty. 

It  should  be  noted  that  the  housing  exemption  automatically 
expires  in  1932.  On  January  1  of  that  year,  the  tax  base  of  the 
city  will  automatically  expand  by  about  a  billion  dollars,  pro- 
vided the  aggr^ate  of  assessed  valuation  of  the  buildings  so 
exempted  r^nains  unaltered.  This  would  add  to  the  borrowing 
power  of  the  dty  $100,000,000,  and  to  the  taxing  power  at  least 
$25,000,000  without  any  increase  of  the  tax  rate. 


Personal  PnoPEjaTY  Taxes 

When  the  tax  on  property  was  a  true  general  property  tax, 
personal  property  formed  an  important  part  of  the  assessment 
rdL  In  the  borough  €i  Manhattan,  in  1866,  it  reached  35  per 
cent,  of  the  total  roll.  This  percentage,  however,  has  melted  away 
under  amendments  to  the  tax  law  and  under  gradual  economic 
changes  which  have  made  it  almost  impossible  to  assess  personal 
property.  At  the  present  time  the  personal  property  amounts  to 
but  2  per  cent,  of  the  tax  roll.  The  situation  during  recent  years 
is  shown  in  the  following  tabulation: 

Pebsonal  Pbopebty  Assessed  for  Taxation  in  Pebcentaob  of  ToxaIi 

Assessments 

1915   4.3 

1918   3.0 

1921   2.13 

1924   2  17 

1925    2.01 

1926   1.95 

1927   2.01 

The  shrinkage  occurring  between  1915  and  1921  was  due  to 
the  change  of  the  tax  law  which  exempted  certain  dasses  erf 
personal  property  at  the  time  when  the  corporate  and  personal 
income  taxes  were  adopted.  The  loss  to  the  city  from  these 
exemptions  has  been  much  more  than  made  up  by  the  revenues 


Financial  Adiiinisxeation:  Revenuss  151 


which  the  city  receives  from  the  state  as  its  share  of  these  new 
taxes. 

The  cities,  towns,  and  villages  of  New  York  State  are  required 
to  assess  personal  property  under  the  same  state  laws  which 
affect  New  York  City.   A  recent  examination  of  the  situation 
shows,  however,  that  the  enforcement  of  the  law  varies  exten- 
sively from  locality  to  locality.^  The  per  capita  assessments  by 
counties  range  from  30  cents,  to  as  h^  as  $44.00.  This  is,  of 
course,  absurd.   The  situation  is  of  importance  to  New  York 
City  because  state  taxes  are  levied  on  the  assessed  valuation  of 
personal  property  with  no  allowance  or  equalization  as  in  the 
case  of  real  property.^  In  view  of  the  fact  that  the  New  York  City 
counties  show  an  unusually  high  percentage  of  personal  property 
assessment  and  the  highest  per  capita  assessments  of  any  of  the 
counties  in  the  state,  the  result  is  a  substantial  discrimination 
against  the  city  in  the  incidence  of  state  taxes. 

It  has  r^)eatedly  been  reoommended  by  l^islative  oommitteeB 
and  others  that  the  personal  property  tax  be  abandoned.  Such  a 
reform  is  surely  desirable  from  many  points  of  view.  Neverthe- 
less, the  personal  property  tax  yields  from  $2,000,000  to  $3,000,000 
a  year  in  New  York  City,  and  cannot  be  set  aside  lightly  in  spite 
of  its  many  defects.  The  situation  is  also  complicated  by  the 
fact  that  the  repeal  of  the  personal  property  tax  would  exempt  the 
stock-in-trade  and  machinery  of  unincorporated  businesses.  This 
suggests  the  advisability  of  coupling  the  r^)eal  of  the  p^sonal 
property  tax  with  the  establishment  of  a  tax  on  the  income  of 
unincorporated  businesses.  The  Legislative  Committee  on 
Taxation  and  Retrenchment  has  recommended  that  the  personal 
property  tax  be  abandoned  at  the  same  time  that  new  revenues 
are  made  available  for  the  city  to  take  its  place. 

That  there  is  something  basically  wrong  with  the  personal 
property  tax  or  with  the  way  in  which  it  is  administered  must  be 
apparent  from  the  conditions  of  collections.   The  arrears  now 

*  Tax  Exemption  in  the  State  of  New  York,  Legislative  Document  1927,  No.  86, 
Chapter  III. 

*  For  real  property ,  the  State  Tax  CommiaBMHi  works  out  each  year  an  equatisaAioii 
table  adjusting  the  inequalities  in  the  actual  assessm^t  ratios  in  the  various  ooumties. 
Hie  state  tax  U  one  inill  is  collected  on  this  adjusted  basis. 


152 


Nkw  Yobk  CiTr's  Financbs  anp 


amount  to  fully  $52,364,053.  Of  this,  $47,731,293  is  for  1925  and 
prior  years,  as  compared  with  $26,840,627  for  real  property  in  the 
same  period.^  Moreover,  in  the  appendix  to  the  1927  budget,  the 
Comptrdler  estimates  that  $34,700,000  of  the  personal  property 
arrears  for  1924  and  prior  years  is  uncollectible.  Unless  a  more 
equitable  system  of  assessment  and  a  more  efficient  method  of 
collection  can  be  provided,  the  wisdom  of  continuing  this  tax  is 
adratndy  doubtful. 


Licenses  and  P&bmftb 
Busine88  and  OempcM&ml  lAceMes 

The  mimicipaEty,  largely  through  its  regulatory  authority, 
licenses  nearly  seventy  types  of  business  establishments,  trades, 
and  occupations.  The  list  ranges  horn  hotel  runners  and  itinerant 
musicians,  to  theatres  and  gas  plants.  Only  a  very  few  of  the 
trades  are  required  to  pay  a  Ucense  fee.  The  more  important 
sources  of  license  revenue  are  as  follows:* 

  1926  1926 

Tlieatres   $96,500  $101,750 

loe  dealers   72,680  72,606 

Common  shows   71,800  81,550 

Auctioneers    51,500  54,700 

Public  dance  halls  and  dances   54,044  60,184 

Billiard  and  pool  tables   49,730  49,755 

Peddlere   44,544  43,822 

Motion  pictuies   39,445  37,301 

Public  cars  (motor)   3^350  41,440 

Electricians   37,968  77,239 

Cnqiioyme&t  agencies   26^350  27,960 

The  ratio  of  revenues  derived  from  business  and  occupational 
licenses  in  New  York  City  has  gradually  declined.  On  the  other 
hand,  the  need  for  additional  revenue  has  driven  many  other  cities 
to  transform  then-  licenses  into  veritable  busineBs  taxes,  yielding 
revenues  considerably  in  excess  of  the  costs  of  inspection  or  similar 
sarvioes.  Though  there  is  considerable  objection  to  petty  license 

»  Comptroller's  Report  for  19B6,  p.  364. 
'From  CQmptroSk^9Bi8fimrl»,lM,  t9$8. 


FiNANCiAii  Admikiskration:  Rbvbnubs  153 


taxes,  a  source  of  income  is  here  dtedoBed  idiidi  is  capable  <rf 

considerable  expansion.^ 

Many  authorities  hold  that  Ucense  taxes  should  not  be  con- 
sidefed  from  the  revenue  raising  standpoint.   They  should  be 
extended  only  to  those  businesses  and  oceupatiiNis  subject  to 
regulation,  supervision,  and  control  by  the  city,  and  only  in  such 
an  amount  as  is  required  to  cover  the  cost  of  such  regulation.  AH 
types  of  business  enterprise  which  involve  exceptional  or  extraor- 
dinary expenditure  on  the  part  of  the  municipality  should  stand 
the  burden  thereof.    Thus,  industries  creating  excessive  industrial 
wastes  and  necessitating  extra  expense  in  waste  removal  or  street 
cleaning,  should  be  made  to  bear  a  fair  share  of  the  cost  of  the 
benefit  they  enjoy.  Certain  businesses  requiring  epedal  police 
protection  might  be  similarly  regarded.    There  are  many  types 
of  business  which  definitely  require  supervision  in  the  interest  of 
the  pubhc  health.   At  present  many  of  these  are  regularly  in- 
spected at  great  expmae  by  the  city  but  without  charge. 

License  fees  of  this  type  may  be  fixed  on  several  diffmnt  bases. 
Flat  fees  are  applicable  to  certain  occupations,  but  the  assessment 
of  businesses  varying  widely  in  size  frequently  necessitates  a 
graded  scale  based  on  income,  rental,  or  physical  factors,  e.  g., 
the  number  of  seats  in  a  theatre.  Some  of  these  methods  are  in 
use  in  New  York  at  the  present  time.  The  most  desirable  criteri- 
on is  the  one  which  measures  most  accurately  the  cost  of  the 
service. 

Existing  business  licenses  are  not  based  on  any  definite  plan. 
Many  ahnost  obsolete  or  relatively  unimportant  types  of  budness 

» Local  Law  No.  18,  passed  December  31,  1926,  amended  Section  1320  of  the 
Charter.  Certain  collections  of  fees  for  permits  issued  by  the  Departm^t  of  Health 
are  creditable  to  the  Health  Departmmt  Praiskm  Fund.  Wftom  May  1,  l«27  to 
Deounber  1, 1927,  the  odtectioiui  were  as  follows: 

Pbriotb        Fn  Total 

Barber  Shop   3007  $10  mOTO 

Slaughter  House 


Beauty  Parlor 
Undertaker  .  . 
Ice  Cream  Paflor 
Restaurant  .  • 


339  SO  16.950 

700  10  •  7,000 

1305  S5  32,625 

1011  10  10.110 

9863  10  98,630 


Tmus   $106^ 

For  a  dncussion  of  the  propriety  of  this  piaelioe,  see  above,  p.  53. 


154 


Nbw  Yobk  City's  Finances  and 


enc 



are  licensed;  other  large  and  important  groups  are  not  subject  to 
regulation.  Certain  occupations  are  required  to  pay  a  li< 
fee,  others  of  equal  importance  are  licensed  free  of  ehttrge. 
businesses  pay  a  high  initial  charge  with  low  renewals;  others  are 
licensed  once  and  for  all,  and  still  others  are  required  to  renew  their 
licenses  every  year.  The  license  fees  exacted  are  often  inequi- 
table as  among  various  businesses.  Theatres  are  required  to  pay 
$500ayear,  and  a  siniilar  fee  is  exacted  for  coneert  halls  although 
the  profits  of  such  enterprises  are  much  less  certain.  Pawn- 
brokers hkewise  pay  $500,  but  junkshops  pay  $20  and  second-hand 
dealers  only  $10.  Bathing  estabUshments  pay  $25,  and  hotob 
and  lodging  houses  nothing. 

There  are  many  instances  of  businesses  requiring  supervision, 
the  cost  of  which  is  borne  entirely  by  the  city.  The  Health 
Department  inspects  food  handling  establishments.  Restaurants, 
groceries,  delicatessen  stores,  butcher  shops,  meat  packers, 
bakeries,  confectioners,  dairies,  and  beverage  manufacturers 
might  well  be  charged  a  Ucense  fee  adequate  to  cover  these 
inspectional  costs.  Soft  drink  parlors  and  stands  are  not  now 
subject  to  any  particular  supervision,  but  should  be  more  thor- 
ou^y  regulated  and  taxed.  All  mspections  of  weights  and 
measures  are  made  without  exacting  any  charge,  and  the  Bureau 
of  Weights  and  Measures  seems  in  fact  to  pride  itself  that  its 
inspections  are  "absolutely  free."  This  service  cost  $80,967 
m  1927,  and  should  be  made  sdfHsrustauung  as  it  is  in  most  other 
citks. 

Other  Suggestions  for  Increased  Miscellaneous  Licenses 

In  New  York,  barber  shops  pay  a  flat  annual  fee  of  $10 
irrespective  of  thdbr  size.  There  are  at  least  seventy-five  hun- 
dred barber  shops  in  New  York,  and  only  a  small  annual  license 
fee  would  be  required  to  meet  the  costs  of  an  adequate  inspec- 
tion. The  various  food  handling  establishments  mentioned 
above  could  be  charged  Ucense  fees.  Laundries  in  many  cities 
eome  under  supervision.  Lic^ises  might  be  considered  for  build- 
ing contractors,  private  detective  agencies,  and  others  deserving 
regulation  under  considerations  of  safety  or  health.  The  Fire 


FiNANdAii  ADioNiBnuknoK:  Rbvenues 


Department  licenses  many  industries  creating  a  fire  hazard,  but 
appears  to  have  neglected  enterprises  such  as  lumber  yards,  wood- 
working plants,  paper  and  stationeiy  supply  houses,  and  up- 
hototerero* 

A  tax  which  falls  within  the  non-business  license  classification 

is  the  dog  tax.  A  state  law  provides  for  the  licensing  of  dogs  by 
the'City  Clerk.  Ten  per  cent,  of  the  revenues  are  paid  to  the 
state  government.  As  eariy  as  1894,  however,  the  city  of  New 
York,  threu^  the  passage  of  a  local  <Nrdinance,  entrusted  the 
licensing  of  dogs  to  the  Society  for  the  Prevention  of  Cruelty  to 
Animals,  and  authorized  that  agency  to  receive  all  fees.  In  1925, 
the  Society  coUected  $234,000.' 

A  Tax  on  Ovirof-Town  Visitors 

Hundreds  of  thousands  of  travellers  and  business  men  visit 
New  York  every  year.  The  city  is  put  to  a  great  deal  of  expense 
for  police  protection  and  otiier  r^ulation  on  this  accoimt.  It 
has  frequently  been  suggested  that  at  least  a  part  of  this  addi- 
tional expense  be  assessed  upon  New  York's  temporary  popular 
tion.  Taxes  of  this  kind  are  common  in  European  countries. 
F<»  example  a  sojourn  tax  is  imposed  in  certain  cUmatic  resorts  in 
France.  Moreover,  as  a  part  of  the  French  tumov^  tax,  hotds 
and  restaurants  are  classified  and  subjected  to  a  special  de  lu» 
tax,  consisting  of  a  percentage  of  gross  receipts.  The  rates  are 
4  per  cent,  on  the  establishments  of  moderate  luxury  and  13  per 
cent,  on  those  of  the  highest  order.  Finally  there  is  a  slight  stamp 
tax  on  restaurant  bills  in  excess  of  twmty  francs.  The  French 
officials  testify  that  the  turnover  tax  on  hotels  is  found  to  be  very 
simple  to  administer. 

If  New  York  is  to  att^pt  something  of  this  sort  perhaps  the 

1  The  legality  of  this  step  on  the  part  of  the  city  was  upheld  by  the  United 
States  Supreme  Court  in  1920,  but  doubts  have  been  expressed  as  to  the  propriety 
of  having  the  municipaUty  turn  over  a  purely  governmental  function  to  a  private 
agency.  The  Society  m^^intAina  a  corps  of  inspectois  and  dog  catchen  to  enfovoe 
the  licensing  piooeduie.  Every  other  large  city,  as  far  as  is  known,  enforces  its 
dog  lionise  law  with  little  additional  work  on  the  part  of  the  Police  Department. 
A  few  more  clerks  may  be  needed  to  issue  dog  licenses  in  case  this  function  were 
to  ba  handled  by  the  city  rather  than  the  Society,  but  the  enforcement  aspects 
could  apparently  be  handled  far  more  economically  by  the  Police  Department. 


156 


Nbw  Yobk  Crnr's  Finangbs  and 


most  feasible  suggestion  would  be  a  tax  of  from  5  to  10  per  cent, 
on  hotel  rooms  occupied  for  periods  of  less  than  one  month. 
Permanent  hotel  guests  could  be  exempted  and  no  tax  levied  on 
rocms  renting  for  less  tllM^  Such  a  tax,  with  per- 

manent hotel  guests  exempted,  would  produce  from  two  and  a 
half  to  seven  million  dollars  annually. 

In  an  effort  to  reach  the  transient  populatioiii  oonsideratbn 
could  also  be  given  to  obtaining  increased  revenues  from  amuse- 
ment CTterprises  and  particularly  from  cabarets  and  night  clubs. 
Should  the  federal  license  tax  of  10  per  cent,  on  amusement 
admissions  be  repealed,  its  place  could  be  taken  by  a  similar  tax 
for  municipal  uses.  The  experience  of  the  patrons  and  of  the 
managers  of  theatres  and  other  amusement  enterprises  with  the 
federal  tax  would  make  it  very  easy  to  administer  a  similar  tax 
for  the  city. 

Revmves  from  Permiis 

The  more  important  permits  issued  by  the  city,  considered 
from  the  point  of  view  of  their  revenue  return,  are  as  follows:  > 

IMi  Ima     IMS  iMoona 

.  $248,757  $223,145 

.  197,238  192,053 

.  165,962  143,645 

.  159;261  163,618 

In  addition  to  these  permits,  more  than  200  other  types  of 
permits  and  licenses  are  issued  by  the  city,  exclusive  of  the 
businesses  and  occupational  licenses  ab-eady  described.  The 
list  of  permits  embraces  authorization  to  keep  goats  and  geese, 
for  example,  to  maintain  a  houseboat  or  a  day  nursery,  to  carry 
a  pistol,  to  solicit  funds,  to  conduct  a  puMic  dance  or  ludd  a  parade, 
to  dump  ashes,  and  to  occupy  a  tenement  basement.  There  are 
many  types  of  permits  in  connection  with  street  traffic  or  repair. 
They  relate  to  the  storage  of  building  material  on  city  streets, 
the  crossing  of  sidewalks  with  a  team  for  excavating  purposes,  and 
ibe  installation  of  conduits,  cables,  or  pneumatic  tubes.  As  in 

^  Compiroaer's  BeportM,  19MS  tmd  19$$. 


Tm  ow  PnmT 

Parks  (laigely  golf  and  auto  paridng  f eee) 

Tapping  of  street  mains  

Sewer  and  drain  permits  

Marriage  licenses  ,  , 


Financial  Ajmonffrnknon:  RavsmnBS  157 


the  case  of  occupational  licenses,  many  of  the  permits  are  issued 

with  no  regard  for  the  fact  that  other  similar  acts  do  not  require  a 
permit.   Fees  are  charged  in  some  cases  and  not  in  others.  In 
the  evmt  that  occupational  licenses  are  made  the  subject  of 
further  study  and  standardization,  permits  should  also  be  ex- 
amined.   Some  cities  collect  a  substantial  sum  from  building 
permits.    In  1924,  nearly  one  billion  dollars  of  building  construc- 
tion and  alteration  was  authorized  in  New  York  City;  had  the 
scale  of  fees  in  effect  in  Newark  been  applied  in  the  oase  of  New 
York,  a  million  dollars  would  have  been  received  by  the  municipal- 
ity.   As  in  the  case  of  business  licenses,  permit  fees  should  be 
based  for  the  most  part  on  the  cost  of  issuance  and  subsequent 
supervision.   A  iqiecial  type  of  permit  is  that  involving  the  use 
of  public  highways  or  public  property.   This  is  considered  undo* 
the  heading  of  highway  privileges. 

Revision  qf  Ldcenses  and  Permits 

It  is  possible  for  the  city  greatly  to  increase  its  income  from 
business  and  occupational  licenses,  fees,  and  permits.    A  more 
equitable  system  could  be  devised,  and  particular  attention  could 
be  paid  to  the  desirability  of  basing  fees  on  the  actual  costs  of 
regulation.  Moneys  appropriated  for  inspectional  purposes  could 
then  be  released  for  other  purposes.   The  obsolete  character  of 
some  of  the  existing  regulations  and  the  changes  that  seem  de- 
sirable are  indicated  in  an  important  report  recently  prepared  in 
tiie  office  of  the  Commissioner  of  Accounts.  This  report  analyzes 
the  fees  collected  by  various  municipal  departments  and  the  costs 
to  the  city  for  the  services  rendered.    It  also  gives  interesting 
data  on  the  fees  charged  for  similar  services  in  other  cities.  The 
facts  are  dear  that,  in  frequent  instances,  New  York  is  not 
unduly  exacting.  "It  is  apparent,"  wrote  Commisrioner  James 
A.  Higgins,  in  transmitting  his  report  to  the  Mayor,  ''that  in 
many  cases  the  fees  collected  are  lower  than  those  charged  in 
other  dties  for  like  services;  and  that  many  of  the  bureaus  now 
operating  at  a  heavy  loss  to  the  city  could  be  made  a  source  of 
revenue  by  an  increase  in  the  fees  charged,  or  by  charging  fees 
in  many  cases  where  no  fees  are  now  required.  This  would  put 


158  New  York  City's  Finances  and 


the  cost  of  the  service  on  those  directly  benefited  instead  of 
upon  the  public  at  large.''^ 

Fines  and  Forfeits 

In  this  classification  are  moneys  exacted  as  penalties  for  viola- 
tion of  law,  and  forfeits  accruing  in  accordance  with  the  terms 
of  contracts  as  penalties  for  non-observance  of  such  contracts. 
Tabtes  II  and  III  indicate  that  these  sources  of  revmne  have 
apparently  held  their  own  during  the  past  fifteen  years  in  meet- 
ing the  requirements  of  the  city  budget.  Amounts  received 
have  more  than  doubled  in  volume.  In  connection  with  any  more 
detailed  investigation  of  revenue  sources,  it  may  prove  desiiable 
to  inquire  into  the  adequacy  of  charges  made  for  court  costs, 
which,  in  some  cases,  have  been  unchanged  for  many  years. 

Rentals  and  Franchises 

Rent  items  constitute  an  important  minor  source  of  revenue 
for  the  city.  More  than  two  million  dollars  are  received  from 
the  rapid  transit  companies  for  the  use  of  subway  properties. 
The  rental  of  other  dty-owned  property  brings  in  over  a  million 
dollars  a  year.  It  is  possible  that  in  other  cases,  a  readjustment 
of  market  charges  or  of  rents  exacted  of  city  tenants  may  disclose 
some  opportunity  for  increasing  the  city  income. 

The  Camj^roUer^s  Report  for  19i6  shows  recdpts  erf  approxi- 
mately two  million  dollars  from  franchises.  Although  the  in- 
come from  this  source  has  increased  during  the  past  ten  years, 
the  relative  importance  of  the  tax  as  a  revenue  producer  for 
the  city  has  decreased.  Any  ^ilargement  of  such  revenues  can 
be  only  slight  imder  the  present  state  tax  laws.  Section  48  of 
the  State  Tax  Law  provides  that  any  payment  made  by  a  pub- 
lic utiUty  to  a  municipaUty  in  connection  with  franchise  privi- 
leges, '  Vhich  payment  was  in  the  nature  of  a  tax,''  the  amount 
80  paid  may  be  deducted  from  the  crpeeial  f randuae  tax. 

iThe  principal  portioiis  ol  this  importont  npart  an  to  be  found  in  the  kppan^ 
p.  319. 


FiNANCiAii  ADMnaffTRATiON:  Rbvknubs 


159 


Highway  Privileges 

A  recent  investigation  by  the  Joint  Legislative  Committee  on 
Taxation  and  Retrenchment^  indicated  an  almost  total  neglect 
of  minor  highway  privileges  as  a  source  of  municipal  revenue 
among  the  municipalities  of  the  state,  including  New  York  City. 
The  prevailing  attitude  of  mind  of  municipalities  was  shown  to  be 
one  which  views  the  private  use  of  street  privileges  as  a  private 
right  rath^  than  as  an  encroachment  on  pubhc  property. 

The  important  sources  of  minor  privilege  revmues  shown 
in  the  Comptroller's  Report  far  1926  are  as  follows:  park  privi- 
leges and  concessions  $241,706;  illuminated  signs  $158,486;  pipe 
lines  and  conduits  $98,359;  bridges  connecting  buildings  $66,360; 
minor  tunnels  $64,524.  The  only  income  shown  in  the  Cowip- 
iroller's  Report  from  news  stands  is  less  ^bhan  $4,000.  In  mtm 
instances  permits  are  required  for  minor  highway  privileges, 
but  no  hcense  fee  is  exacted.  As  in  the  case  of  occupational 
licenses  and  permit  fees,  a  thoroughgomg  examination  of  the 
various  minor  highway  privileges  would  suggest  methods  of  ior 
creasing  the  income  of  the  city  from  this  source. 

Sidewalk  vaults  are  probably  the  most  valuable  minor  en- 
croachment upon  the  subsurface  of  streets.  For  permission  to 
construct  a  vault  the  city  charges  an  initial  fee  of  ten  cents  to 
two  dollars  for  each  square  foot  of  area  affected,  but  no  annual 
charge  is  levied  for  the  privilege  of  maintaining  the  vault.  In 
Baltimore,  and  in  a  number  of  other  cities,  annual  rental  charges 
of  this  sort  are  now  made.  Such  charges  hi  New  York  City 
would  yield  a  considerable  sum.  In  1913,  after  a  careful  study  of 
the  situation  on  Broadway,  Fifth  Avenue,  14th,  23rd,  34th,  and 
42nd  Streets,  it  was  estimated  that  approximately  one  milhon 
dollars  a  year  could  be  realized  from  vaults  on  those  streets 
alone.  This  estimate  was  based  on  a  rental  rate  of  5  per  cent,  of 
the  value  of  the  space,  which  was  to  be  determined  in  accordance 
with  the  average  value  per  square  foot  of  the  abutting  property. 
The  administration  of  such  a  revenue  measure  would  be  simple 
because  most  of  the  needed  facts  could  be  drawn  from  the  permits, 

^  LogislaUve  Document,  No.  86  (1827). 


160 


New  York  City's  Finances  and 


buildings  plans,  and  tax  books  and  maps.  Collection  could  be 
handled  with  the  real  estate  taxes. 

BtUboards 

Outdoor  advertising  is  another  encroachment  upon  public 
thoroughfares,  either  directly  or  indirectly,  which  investigation 
migjit  show  to  be  a  ne^ected  souice  of  revalue,  niuminated 
signs  now  furnish  an  annual  revenue  of  $158,486.  It  may  be 
argued  that  signs  of  all  types  should  pay  an  annual  fee  not  only 
because  of  the  exercise  of  a  highway  privilege,  but  for  regulative 
purposes;  they  may  become  unsightly  and  in  some  cases  danger- 
ous.* Subway,  street  car,  ^vated  train,  and  motor  bus  adver- 
tising could  also  be  inquired  into.  Franchise  privileges  to  operate 
transportation  facilities  rarely  include  the  right  to  sell  advertising 
spam  in  earn  or  buses. 

The  Earnings  op  General  Depabtmbnts 

Hie  €»rniTigR  of  general  departm^ts  include  the  revenues  from 

general  administrative  activities  except  public  service  enterprises 
such  as  the  water  supply  system,  docks,  and  markets.  These 
revenue  receipts  are  derived  from  fees,  charges,  and  sales.  The 
most  important  item  is  five  million  dollars  m  various  fees.  Sales 
of  pubUcations  and  supplies  brought  in  $430,000. 

A  substantial  enlargement  of  income  from  departmental  earn- 
ings has  taken  place  since  1915.  These  revenues  now  form  a 
rdativdy  larger  part  of  the  total  city  revenues  than  they  did  at 
that  tune.  Still  further  revenues  could  probably  be  derived  from 
this  source.  The  Department  of  Public  Welfare  several  years 
ago  installed  a  system  of  charges  for  hospital  patients  able  to 
pay  in  part  for  their  care.  It  emptoys  a  force  of  investigators  to 
make  the  necessary  collections. 

One  possible  method  of  increasing  departmental  earnings  may 
be  a  change  in  the  method  of  waste  disposal.  A  preliminary 
sludy  of  ti^  waste  disposal  probl^  made  in  1920  indicated  that 

>  The  city  of  Baltimore  has  been  a  pioneer  in  working  out  plans  for  taxing  out- 
door advertising.  The  city  is  districted  and  the  levy  upon  advertiBing  viiies  with 
its  size  and  location. 


Financial  Administration:  Rbvbnubs  161 


collection  and  disposal  costs  amounted  to  $3,500,000  a  year  as 
compared  with  approximately  $5,000,000  that  might  be  derived 
from  the  operation  of  garbage  reduction  plants  in  place  of  the 
present  sea  dumping  plan.  Reduction  plants  in  some  dties  are 
operated  at  a  profit.  Other  cities  sell  the  raw  garbage  at  a  figure 
that  pays  a  considerable  part  of  the  collection  cost.  A  recent 
investigation  <d  the  reduction  system  in  Chicago  indicated  that 
under  skilled  management  and  with  adequate  reduction  ma- 
chinery, a  small  loss  could  be  converted  into  a  profit.  New  York 
City  is  at  the  present  time  facing  the  necessity  of  abandoning  sea 
dumping  and  making  capital  expenditures  for  incinerators.^  It 
would  be  worth  while  in  this  connection  to  consider  the  advis- 
ability of  reduction  plants  that  could  make  a  profit  out  of  the  sale 
of  grease  and  other  by-products,  but  there  are  obvious  disadvan- 
tages to  the  city's  embarking  on  sudi  a  business  unde>rt>aking. 

Earnings  of  Public  Sbbvicb  Entbbpbisbs 

Gross  revenues  from  municipally  operated  public  utilities  con- 
stitute about  5  per  cent,  of  the  city's  income  —  more  than 
$25,000,000  a  year.  The  past  tm  years  do  not  show  any  start- 
ling increase  in  the  revenues  of  these  enterprises.  They  contrib- 
ute a  slightly  smaller  percentage  of  city  revenues  than  formerly. 
The  city  at  present  operates  several  bus  lines,  ten  pubUc  ferries, 
and  a  number  of  short  trolley  and  trackless  trolley  lines. 

The  water  i^venues  present  a  difficult  situation.  The  city  has 
made  tremendous  investments  in  its  water  supply  system. 
Since  1905  $185,000,000  has  been  expended.  The  users  of  water 
diould  be  required  to  pay  fully  for  thdr  water.  This  is  no  more 
than  fair  and  would  encourage  economy  in  the  use  of  water. 
The  raXe  would  then  be  based  upon  the  amount  used  instead  of 
front  footage  and  the  number  of  appliances,  etc.  Metering  would 
bring  in  more  revenue  than  the  present  system,  but  the  practical 
difficulties  of  installation,  for  a  city  like  New  York,  would  be 
enormous,  perhaps  insurmountable.  Metering  would  insure 
greater  economy  in  use,  but  it  may  be  argued  that,  with  the 

>  FV>r  tbe  Stzeet  Qeaning  DepartmoiVB  estinyiteB  of  its  future  needs,  see  b»- 
kw,  p. 


162  New  York  City's  Finances  and 

available,  untapped  sources  not  numerous,  a  policy  which  forces 
the  city  to  secure  large  additional  water  supplies,  is  not  unwise. 
If  the  city  waits  too  long,  the  available  sources  may  be  lost.  Mean- 
while the  fiscal  problem  could  be  satisfactorily  solved  by  an 
intelligent,  thoroughgoing  revision  of  the  present  water  rates. 

Whatever  the  city's  policy  in  respect  of  municipal  services  — 
that  is,  whether  it  is  desired  to  make  a  profit,  to  permit  them  to 
be  conducted  at  a  loss,  or  to  have  them  self-sustaining  —  adequate 
cost  records  must  be  kept.  The  city  should  be  able  to  tell  whether 
a  particular  service  is  making  a  profit,  suffering  a  loss,  or  doing 
neither.  In  the  United  States  the  accepted  fiscal  policy  is 
usually  that  municipal  services  should  be  selfnsustaining.  On 
the  other  hand,  foreign  countries,  where  municipal  operation  of 
transportation  and  other  utilities  is  common,  frequently  attempt 
to  secure  substantial  profits  from  these  enterprises.  These 
profits  go  toward  the  expenses  of  other  mimicipal  activities. 
Such  a  form  of  indirect  taxation  has  been  generally  avoided  in 
the  United  States. 

Crrr's  Share  of  State  Taxes 

The  city  receives  over  S  per  cent,  of  its  total  revenues  from 
various  state  taxes.  These  combined  are  the  second  largest 
source  of  mimicipal  revenue  and  represent  the  most  important 

recent  development  in  the  finances  of  the  city.  Each  of  these 
taxes  is  discussed  briefly  in  the  following  paragraphs. 

The  State  Income  Tax 

The  tax  on  personal  incomes  under  a  graduated  scale,  provided 
in  Article  16  of  the  Tax  Law,  is  administered  by  the  State  Tax 
Department,  but  one-half  of  the  income,  after  the  deduction  of 
certain  expenses,  from  this  source  reverts  to  the  municipality.^ 

^"FiSty  per  centmii  shall  be  paid  into  the  state  tieasiuy  to  the  credit  of  the 
goiieral  fund.  The  remaining  fifty  per  centum  thereof  shall,  not  later  than  the  first 
day  of  July,  and  in  case  of  moneys  subsequently  collected  at  least  quarterly  there- 
after, be  distributed  and  paid  to  the  treasurers  of  the  several  counties  of  the  state, 
in  the  proportion  that  the  assessed  valuation  of  the  real  property  of  each  county 
bears  to  the  aggregate  assessed  valuation  of  the  real  property  of  the  state."  Tax 
Law  (ConsoUdated  Laws,  Chi^  61),  (383. 


Financial  Administration:  Rbvenubs  163 


Since  its  adoption  in  1919,  it  has  proved  a  valuable  source  of 
revenue,  far  in  excess  of  earlier  returns  from  the  assessment  of 
intangible  personalty  which  was  abandoned  as  a  tax  source  in 
1919.  Although  at  present  utilized  by  but  a  few  of  the  states, 
the  income  tax  has  come  to  be  recognized  as  one  of  the  most 
equitable  f  omis  of  taxation. 

The  Mortgage  Recording  Tax 

A  state  tax  of  fifty  cents  for  each  one  hundred  dollars  of  the 
amount  of  debt  secured  by  mortgages  on  real  property  situated 
in  the  state  is  provided  by  Article  11  of  the  Tax  Law.  It  is 
county  administered,  one-half  of  the  revenue  bring  turned  over 
to  the  city,  the  other  half  going  to  the  state.  The  tax  is  collected 
when  mortgages  are  recorded. 

The  returns  from  this  tax  constitute  an  important  part  of  the 
city's  income.  The  size  of  the  returns  varies  considerably  from 
year  to  year,  and,  as  will  be  seen  by  reference  to  Table  I,  depends 
upon  the  extent  of  building  activity.  In  1926,  the  tax  netted 
New  York  Qty  nearly  five  million  dollars. 

The  Corporation  Income  Tax 

The  franchise  tax  imposed  on  the  net  income  of  corporations, 
at  the  rate  of  43^  per  cent,  is  prescribed  in  Article  9a  of  the  Tax 
Law.^  It  was  inaugurated  in  1917.  No  state  tax  is  at  present 
imposed  on  unincorporated  businesses.  Various  proposals  have 
been  made  that  such  businesses  be  taxed.*  It  should  be  borne 
in  mind,  however,  that  such  enterprises  do  not  share  the  limited 
lial:»lity  and  other  privil^^  enjoyed  by  corporations  for  which 
it  is  not  unreasonable  to  make  some  charge.  If  it  should  seem 
desirable  to  raise  the  corporation  rate  to  6  per  cent,  and  impose 
a  slightly  lighter  tax,  e.g.y  upon  unincorporated  business  enter- 
prisesy  the  State  Department  of  Taxation  and  Finance  estimates 
that  at  least  $13,000,000  can  be  derived  from  this  source.  Part 
of  this  amount  might  be  shared  by  the  municipalities. 

*  In  the  case  of  corporations  doing  business  more  than  a  state-wide  business  the 
income  ye  apportioned.    A  minimum  tax  based  on  capital  stock  is  imposed. 

*  E.g.,  Report  of  the  Joint  LegisUUwe  Committee  on  ths  Finances  of  the  City  of  New 
Yorkf  1922  (Meyer  Committee).   See  bdow,  p.  894. 


164  New  Yobk  em's  Fdcangss  and 


Reed  Estate  Broker^  s  License  Tax 

The  statCi  under  Article  12a  of  the  Real  Property  Law^  charges 
an  annual  license  fee  for  the  privily  of  doing  business  as  a  real 
estate  broker  or  real  estate  salesman.  The  rates  range  from  two 
dollars  to  twenty-five  dollars,  and  one-half  of  the  tax  reverts  to 
the  local  conununities.  As  a  leraiue  piodiieer,  the  tax  is  not 
veiy  important. 

Motor  Vehide  License  Fees 

Fees  collected  by  the  State  Conmiissioner  of  Motor  Vehicles 
for  the  registration  of  motor  cars,  trudos,  and  motorcycles  have 
been  an  important  part  of  ihe  state  revenues  for  the  past  decade. 
From  1910  to  1916,  the  municipalities  received  no  part  of  this 
revenue;  from  1916  until  1919,  50  per  cent,  of  the  fees  reverted  to 
the  counties;  since  1919,  the  state  has  retained  three-fourths  and 
the  coimties  have  received  one-fourth.  New  York  City  is  entitled 
to  receive  the  amount  payal^  to  its  five  counties.  In  view  of 
the  heavy  cost  to  which  the  city  is  put  for  traffic  control  and  for 
maintenance  of  streets  because  of  the  wear  and  tear  for  which 
motor  vehicles,  particularly  heavy  trucks,  are  responsible,  it 
may  be  proper  to  inquire  whether  the  municipality  should  not  be 
entitled  to  more  than  the  25  per  cent,  allowance  at  present  made 
by  the  state. 

Subventions 

An  important  development  in  the  dty  revenues  during  the 
past  ten  years  is  the  growth  of  state  aid  for  education.  State  aid 
is  not  a  gratuity.  It  is  a  method  by  which  the  state  diflfthftygeft  a 
part  of  its  responsibility  for  free  public  education  and  endeavon 
to  secure  a  f  aire*  distribution  of  the  benefits  and  cost  of  education. 
The  great  productive  taxes,  with  the  exception  of  the  real  estate 
tax,  must,  under  modem  conditions,  be  administered  by  the 
state.  In  the  United  States,  most  educational  functions  are 
locally  managed.  This  makes  it  necessary  for  the  state  to  share 
the  product  of  its  taxes  with  the  localities,  either  in  the  form 
of  specific  shares  or  in  the  form  of  state  aid. 

Federal  aid  is  usually  awarded  as  an  inducement  to  ^courage 


Financial  Adminibiration:  Rbvsnuss  165 


certain  activities  which  the  states  or  cities  might  otherwise  not 
be  inclined  or  able  to  afford.  This  element  of  inducement  has 
be^  ahnost  entirely  eliminated  in  the  state  aid  policy  of  New 
York  State.  Otherwise,  there  would  be  a  danger  of  encouraging 
extravagance  and  of  giving  large  amounts  of  aid  to  the  wealthy 
communities  which  can  easily  avail  themselves  of  the  proffered 
state  aid. 

State  Aid  far  SOiools 

In  1926,  $21,560,670  was  received  by  New  York  City  from 
state  aid.  The  whole  of  this  amount  went  to  the  Board  of 
Education  for  school  purposes.  Any  increases  in  state  aid 
revenues  rest  with  the  legidature  rather  than  with  the  municipal 
assembly.  It  may  be  pointed  out,  however,  that  it  is  a  com- 
monly accepted  principle  that  the  state  should  assist  municipali- 
ties in  finRTM»ing  educational  activities.  The  state  should  afford  a 
satisfactory  educational  opportunity  for  every  child.  The  equali- 
zation of  educational  opportunity  and  the  question  of  state  aid 
have  been  the  subjects  of  much  deUberation  by  the  Legislative 
Committee  on  Taxation  and  Retrenchment  and  by  the  Friedsam 
Commission.^  The  programme  recommended  by  these  groups 
has  hem  adopted  by  the  legislature.  New  York  City,  th^ore, 
will,  in  the  future,  receive  considerably  more  from  the  state  for 
school  purposes. 

New  Sources  of  Revenue 

Commissions  or  committees  have  frequ^tiy  been  set  up  to 

seek  new  sources  of  revenue  for  New  York  City.  Important  new 
state  taxes  have  been  estabUshed.  The  state  has  shared  these 
taaees  with  the  locaUties,  either  in  fixed  proportions  or  through 
the  channel  of  state  aid  for  education.  All  important  tax  meas- 
ures which  have  been  before  the  Legislature  in  recent  years  have 
presupposed  further  distribution  to  the  localities.  It  is  probable 
that  this  new  policy  is  destined  to  be  extended  still  further  and 
that  the  city  may  look  forward  to  receiving  an  even  larger  propor- 
tion of  its  revenues  from  state  taxes. 

^Legifllative  Documents  Nos.  97  (1925),  and  68  and  92  (1926). 


New  York  City's  Financbs  and 


A  Tax  an  "Unearned  Increments" 

Varioiis  commissions  have  recommended  a  tax  on  increments  of 
land  values.  In  1913  the  Commission  on  New  Sources  of  Revenue 
outlined  in  detail  a  scheme  for  such  an  increment  tax.  It  pro- 
posed a  permanent  tax  of  one  per  cent,  per  annum  on  all  increases 
above  the  assessed  valuation  of  the  year  previous  to  the  enact- 
ment of  the  law.  The  tax  would  be  not  only  permanent  but  also 
cumulative  in  the  sense  that  the  incremmts  would  be  subjected  to 
the  one  per  cent,  rate  year  after  year.i  The  Commission  did  not 
propose  to  levy  the  tax  upon  any  increments  which  could  be 
shown  to  have  r^ulted  from  the  owner's  efforts  or  expenditures, 
(NT  from  improv^ents  for  which  he  had  been  assessed.  The  tax 
was  intended  to  reach  only  the  unearned  increment.  The  Com- 
mission estimated  that  during  the  preceding  decade  land  values 
had  increased  annually  by  about  $150,000,000.  A  one  per  cent 
cumulative  tax  would  presumably  have  3delded  $1,500,000  in  the 
firat  jrear  and  by  the  tenth  year  would  have  been  producing 
$15,000,000. 

The  1916  Conmaittee  on  Taxation  repeated  the  recommenda- 
tion and  concurred  in  the  plan  of  asmall,  cumulative,  and  annual 
collection  in  place  of  a  large  periodic  collection  along  the  lines  of 
the  English  and  German  plans.  The  1916  Commission  also 
refined  the  project  so  as  to  take  care  of  depreciating  buildings  on 
i^preciating  land.  It  proposed  that  no  land  increment  should 
be  taxable  in  a  normal  case  until  the  decreasing  building  value 
was  overtaken  by  the  increasing  land  value. 
.  Conditions  created  by  the  World  War  have  thrown  new  light 
on  this  problem.  In  England,  the  g^eral  increase  in  prices  was 
accompanied  by  increases  in  rents  and  in  land  values.  It  was 
evident  that  the  money  increases  in  land  values  were  not 
true  increases,  and  that  it  would  be  grossly  unfair  to  apply  an 
increment  tax  to  them.  The  entire  scheme  was  abandoned.  In 
Gmnany,  inflation  was  more  serious.  The  rise  of  land  prices  was 
checked  by  rent  restrictions,  but  the  situation  soon  became  so 
absurd  that  the  tax  could  not  be  enforced.  When  the  mark  was 

^Tbe  CommMBkm'g       eo^jIaoMacm  tji  its  pbtk  m  pven  ^i  fuQ  in  tb?  Appeoi^ 


Financial  Administbation:  Revenues  167 


stabihzed,  the  increment  tax,  or  Grundwert-Zuwdchs-Steuer^  was 
again  enforced.  The  rate  is  five  to  fifteen  per  cent,  of  the  accre- 
tion in  value  from  one  sale  to  the  next.  The  tax  is  collected 
normally  at  the  time  of  the  sale.  In  Berlin  in  1926,  the  increment 
tax  amounted  to  about  eight  per  cent,  of  the  tax  on  real  estate. 

The  rise  of  real  estate  values  in  New  York  City  during  the 
past  decade  has  been  due  in  no  small  measure  to  changing  price 
levds.  The  increase  in  sale  piice  of  a  given  parcel  of  land  may 
not  have  been  an  increase  in  the  basic  value  of  the  land,  but 
merely  a  decrease  in  the  purchasing  value  of  the  dollar.  On  the 
other  hand,  individual  properties,  and  even  whole  sections  of  a 
city,  have  increased  in  value  to  an  extent  quite  out  of  proportion 
to  any  effort  or  investment  by  the  property  owner,  but  because  of 
the  growth  of  the  city,  and  because  of  improvements,  such  as 
subways,  for  which  no  assessments  are  imposed.  Should  the  city 
take  back  a  part  of  this  community-created  value?  The  solution 
of  the  difficulty  may  possibly  be  found  in  a  further  refinement  of 
the  increment  tax  plan  by  the  use  of  a  price  index.  The  actual 
and  the  apparent  increases  in  land  value  might  thus  be  separated. 

Ofher  Suggesbione 

New  major  sources  of  revenue,  however,  are  for  the  most  part 
sources  that  must  be  tapped  by  the  state  for  distribution  to  local 
governments.  A  gasoline  tax,  for  example,  would  have  to  be 
administered  by  the  state.^  Similarly,  a  personal  income  tax 
surcharge  levied  by  the  cities  —  this  was  suggested  by  the  Joint 
Legislative  Committee  in  1925  —  would  have  to  be  collected 
throughout  the  state  and  rebated  to  the  municipalities.  City 
revenues  in  Europe  are  based  very  largdy  on  this  principle.  In 
many  cases  the  state  taxes  and  then  divides  the  proceeds  among 
the  smaller  governmental  units  or  these  local  governments  im- 
pose additional  increments  of  taxation  on  subjects  already  taxed 
by  the  central  authorities.  These  European  practices  are  there- 
fore of  particular  interest  to  students  of  American  municipal 
finance.  European  methods  are  worthy  of  study  in  connection 
with  new  sources  of  revenue  for  New  York  City. 

iQn]^  Ifew  Yoil(  anfl  lh|imebuse<^  f^il  to  impom  taxes  on  gMoiiiie. 


CHAPTER  VI 


THE  ASSESSMENT  OF  PROPERTY  FOR  TAXATION  AND 

SPECIAL  ASSESSMENTS 

New  York  City  collects  almost  three-fourths  of  its  revenues 
from  property  taxes  and  special  assessments.  The  adminis- 
trative organization  and  the  operating  procedure  by  means  of 
which  these  assessments  are  levied  and  collected  are  therefore 
<rf  great  importance.  It  is  the  purpose  of  this  chapter  to  outline 
these  oiganizations  and  their  work. 

Assessments  fob  General  Pbopebty  Taxes 

The  most  important  agency  involved  is  the  Department  of 
Taxes  and  Assessments.  This  Department  is  responsible  for 
preparing  each  year  the  assessments  of  real  estate  and  personal 
property,  which  serve  as  the  basis  for  the  property  taxes  and 
eitywide  or  borough  general  assessments.  These  assessed  values 
have  a  further  significance.  The  debt  limit  of  the  city  and  the 
city's  share  of  the  state  income  tax  depend  upon  the  aggregate 
real  estate  assessment,  while  the  maximum  tax  limit  depends 
upon  the  total  real  and  personal  assessments.  The  only  property 
taxable  locally  which  is  not  assessed  by  the  Department  of  Taxes 
and  Assessments  is  the  "special  franchise''  value  of  pubhc  utili- 
ties, which  is  assessed  by  the  State  Department  of  Taxation  and 
finance  and  certified  to  the  city  for  inchisbn  with  other  property 
in  the  tax  roll.^ 

1  Hub  Bpeaal  franchise  value  inchides  the  tangible  property  of  pabHc  utilitiesi 
mch  na  street  car  rails,  conduits,  wires,  and  gas  pipes  which  are  in,  on,  over,  under,  or, 
across  public  highways,  with  certain  exceptions,  together  with  the  intangible  right 
of  using  the  public  highways.  All  of  this  property  is  by  law  defined  as  real  estate, 
though  as  a  matter  of  fact  20  to  52  per  cent,  is  Usted  as  intangible  value  by  the  State 
Tax  Commiaakm.  (Tax  Law,  Section  2  (6),  (7);  Report  of  the  State  Tax  Cwnmisaion^ 

168 


Financial  Administration:  AaaicfwanBNTO  160 


Orgamzation  qf  the  Department 

This  Department  of  Taxes  and  AaaeBSiMits  is  preaded  over 
by  the  Board  of  Taxes  and  Assessments.  The  Board  conasts  of 
seven  commissioners  appointed  by  the  Mayor.    The  president 
must  be  a  resident  of  Manhattan.  No  two  members,  who  be- 
long to  the  same  poUtical  party,  may  come  from  the  same  borough 
except  Manhattan.  Of  the  seven,  no  more  than  five  shaU  be  <rf 
the  same  party.   One  of  the  commissioners  must  be  a  lawyer.* 
The  president  recdves  $12,000  a  year  and  the  other  members 
19  000  eaeh.  Th^e  is  an  assistant  to  each  of  the  seven  commis- 
sioners. These,  and  two  secretaries,  are  the  only  persons  in  the 
Department  exempt  from  the  merit  system.    All  ttie  other 

employees  are  mider  civil  service. 

The  Department  TPft^^^^^^ift  an  ofiSce  in  each  of  the  five  boroughs. 
Each  has  a  deputy  m  charge.  There  sie  105  assessmmt  districts 
in  the  city.  Deputies  are  assigned  to  each.  There  is  also  a  clerk 
for  each  district.  The  Board  meets  to  approve  the  boundaries  of 
these  districts  each  spring.  The  size  of  the  districts  is  determined 
by  the  staff  available.   Many  of  the  districts  are  excessively 
large.    Manhattan,  for  example  has  16  districts,  and  but  42 
employees.   Each  central  borough  office  has  its  staff  of  clerks, 
searchm,  etc.  There  is  also  a  deputy  or  two  in  each  borough  in 
charge  of  the  assessment  of  personal  property.  About  260  of  the 
employees  are  assigned  to  real  estate  and  31  to  personal  estate. 
The  deputy  tax  commissioners,  the  actual  assessing  officers, 
leodve  salaries  ranging  from  $2,520  to  $4,700;  most  receive  less 
than  $4,300.  Ten  of  the  18  deputies  in  Manhattan  have  been  in 
the  service  for  20  years  or  more;  at  least  two  have  served  more 
than  30  years.  The  total  salary  appropriation  of  the  Department 

is  now  $1,018,678.' 

The  general  administration  offices  are  in  the  Municipal  Building 
m  Manhattan.  There  also  are  located  the  staffs  employed  on  Oie 

lots  o  87)  This  anomalous  situation  came  about  in  1899,  when  Governor  Rx)ose- 
velt  forced  through  an  amendment  of  the  tax  law  preventing  pubhc  utiUties  from 
deducting  their  indebtedness  from  their  franchise  valuations  as  is  possible  m  the 
case  of  personal  property  under  the  New  York  State  Law. 

1  Charter,  Sections  96,  107,  884  ff.    ^  «  ^   ^  * 

« Fibres  obtained  f nin  the  CWl  IrfK  of  July,  IW,  wd  Budget  for  1«27. 


170 


Nbw  York  City's  Finances  and 


real  estate  of  corporations,  which  is  handled  separately  from 
other  real  estate  as  a  matter  of  administrative  convenience.  The 
surv^or,  who  has  charge  of  the  preparation  of  tax  maps,  has  an 
office  in  each  of  the  boroughs.  The  deputies  and  their  field  books 
are  the  principal  sources  of  information  for  the  Board  in  reviewing 
afisessments.  The  taxpayers^  however,  occasionally  call  attention 
to  undervaluations  of  ndighboring  properties. 

There  are  747,010  parcels  of  real  estate  in  the  city  (1927),  an 
average  of  7,000  for  each  assessment  district.  The  land  value  of 
these  totaled  $6,982,333,754,  and  the  improvements  are  worth 
almost  an  equal  sum,  making  a  total  valuation  of  $13,7119408,215.* 

Procedure  of  Assessment 

Each  district  deputy  keeps  a  field  book.  This  is  prepared 
annually  with  the  aid  of  the  surv^or  and  lists  eadi  parcel  of 
property  by  lot  and  block  number,  with  a  description  of  the  prop- 
erty. In  these  books  are  recorded  all  memoranda  of  sales, 
mortgages,  leases,  rents,  etc.  These  essential  records  of  evidence 
bearing  upon  values  are  kept  by  the  individual  deputies  as  they 
see  fit.  Some  of  the  records  are  (systematic  and  complete,  while 
others  are  practically  worthless. 

It  is  becoming  increasingly  difficult  to  keep  track  of  sales.  The 
tendency  is  to  report  the  sale  for  ^'one  dollar  and  other  valuable 
consideration."  While  the  federal  stamp  tax  on  real  estate 
transfers  was  in  existence,  it  was  possible  to  calculate  the  amount 
of  the  sale  from  the  amount  of  the  stamps.  But  this  resource  is 
no  longer  available. 

These  very  neeessaiy  figures  for  sales  oould  be  obtained  in 
either  of  two  ways.  The  simplest  plan  would  be  the  institution 
of  a  stamp  tax  on  conveyances.  There  would  be  a  penalty  for 
afEbdng  fewer,  stamps  than  those  required  by  the  amount  of  the 
sale.  The  other  possible  method  would  be  to  require  by  law  the 
filing  of  an  affidavit  of  the  true  and  bona  fide  consideration,  and, 
in  the  case  of  exchanges,  the  character  of  the  property  exchanged. 
It  may  be  that  this  information  should  be  r^)orted  to  the  Depart- 
ment of  Taxes  and  Assessments  in  the  form  of  an  affidavit  and 

^  Excluding  special  franchises  and  real  estate  of  corporations. 


Financial  Administration:  Assbssmbnts  171 

kept  by  it  in  a  confidential  file  so  that  it  would  be  available  for 
the  exdusive  use  of  the  Department  and  otherwise  only  upon 
order  of  a  court  of  competent  jurisdiction.  This  is  a  more  intricate 
system  and  more  difficult  of  enactment.  Its  possibility  <rf  abuse 
cannot  be  ignored.  The  merit  of  either  system  from  the  stand- 
point of  assesfimmt  must  be  obvious.  Such  records  might  also 
be  available  in  condemnation  proceedings. 

Beginning  April  1  each  year,  the  annual  assessment  for  the 
following  year  is  commenced.  The  first  procedure  is  the  prepara- 
tion of  the  tentative  land  value  maps.  These  maps  indicate  the 
av^Bge  front  foot  value  for  each  side  of  each  block.  All  land 
values  are  calculated  from  these  bases.  Allowances  are  made  for 
various  widths  and  depths  in  accordance  with  the  Hoffman-Neill 
tables.^  Since  1912,  these  land  value  maps  have  been  printed 
in  a  volume  published  about  October  1,  the  time  tiiat  the  assessed 
valuations  are  announced. 

The  Charter  provides  that  ''the  taxable  status  of  all  persons  and 
property  assessable  for  taxation  in  the  City  of  New  York  shall  be 
fixed  for  each  year  on  the  day  of  October  in  the  preceding  year 
provided  by  law  for  the  op^iing  of  the  books  of  annual  record  of 
the  assessed  valuation  of  real  and  personal  estate  of  that  year." 
There  is  need  for  clarification  of  the  law  in  the  case  of  buildings 
imder  construction.  Where  a  structure  was  begun  prior  to 
October  1  of  the  previous  year,  it  may  be  assessed,  if  not  yet 
complete,  as  an  improvement  in  progress.  But  section  88to  of 
the  Charter  provides:  "A  building  in  course  of  construction, 
commenced  smce  the  preceding  first  day  of  October  and  not 
ready  for  occupancy,  shall  not  be  assessed."  As  a  result,  many 
buildings  are  almost  completed,  but  a  portion,  sometunes  a 
small  portion,  is  left  unfinished.  When  October  1  is  passed, 
these  are  quickly  completed,  and  perhaps  by  October  3  the  build- 
ing is  ready  for  occupancy  and  t^iants  move  in.  The  effect  of 
this  is  to  deprive  the  city  of  many  thousands  <rf  dollars  annually. 

»The  oldest  rule  in  use  for  the  determination  of  values  of  parts  of  lots  was  sug- 
gested by  Judge  Murray  Hoffman  in  1866,  viz.,  that  the  front  half  of  the  lot  was 
!^rth  two-thirds  of  the  value  of  the  lot.  An  elaborate  scale  was  worked  out  by 
H  H  Neill  real  estate  editor  of  the  Evening  Mail,  on  the  basis  of  100  feet  as  a  unit 
of  depth,  with  the  value  of  the  first  SO  feet  equal  to  6^%  of  the  value. 


172  Nkw  York  City's  Finances  and 

The  real  estate  of  corporations  is  assessed  by  the  district 
deputies  but  reported  direct  to  a  bureau  of  the  main  oflace.* 
There  is  prepared  a  separate  Annual  Record  €f  the  Aesesaed 
Vabtaiim  of  Real  Esiaie  qf  CarparaiUma.  In  1925,  the  assess- 
mssat  roll  of  corporations  amounted  to  $292,090,500.  Special 
franchises  are  valuated  by  the  State  as  has  beea  ea^lained. 

Public  Inspection  and  Hearinge 

The  records  of  assessed  valuations  of  real  and  personal  property 
must  be  completed  and  opened  for  public  inspection  by  October  1. 
These  books  show  for  each  parcel  of  real  estate  the  valuatioDs  of 
hoih  land  and  improvements.  The  real  estate  books  remain 
open  mitil  November  15,  when  they  are  closed  in  order  that 
the  tax  rolls  may  be  prepared.  The  conmiissioners  have  the  power 
to  increase  assessments  only  during  the  period  when  the  books  are 
open.  Where  increases  are  made,  notice  must  be  sent  to  the  last 
known  owner  and  the  time  for  protest  is  extended.  This  six 
weeks'  period  in  which  assessments  may  be  advanced  does  not 
appear  to  be  sufficient.  If  the  present  fiscal  calendar  is  continued, 
the  books  should  certainly  be  kept  open  to  December  15,  and 
perhaps  to  December  31.  The  present  arrangement  prevents 
increases  on  the  basis  of  information  obtained  during  hearings. 

During  the  time  that  the  books  are  open,  any  taxpayer  may 
make  written  protest  concerning  his  assessment.  One  of  the 
commifiHdoners  holds  hearings  and  takes  testimony  in  each  borough 
on  these  complaints.  In  the  more  important  matters  the  full 
Board  holds  hearings.  In  all  cases,  the  Board  must  take  the 
official  action.  In  a  few  cases,  stenographic  minutes  are  kept  of 
these  hearings.  In  personal  property  cases,  the  preliminary 
examinations  are  held  by  the  deputy  commissioners.  The 
Board  may  continue  its  examination  of  these  applications  until 
February  1,  when  the  books  are  finally  closed.  The  corrections 
made  by  the  crnnmiwdoners  appear  in  tiie  final  rolls.* 

The  Board  has  a  series  of  elaborate  forms  which  taxpayers 
must  fill  out  when  they  apply  for  corrections.  The  real  estate 

iCaiarter,SeetkHi883. 

>  CaiMter,  SeeClMui  S94, 886, 897. 


Financial  ADiONismATioN:  Assbsbmbnto  173 


blank,  for  example,  asks  a  number  of  pertinent  questions  in 
respect  of  improvements  and  their  cost,  sale  price,  rentals, 
mortgages,  etc.  The  power  of  the  commissioners  to  prescribe 
such  forms  is  not  clearly  set  forth  in  the  Charter  and  some  tax- 
payers refuse  to  comply  with  these  rules.  It  would  seem  obvious 
that  the  Board  should  have  authority  to  adopt  rules  and  regula- 
tions, not  inconsistent  with  law,  covering  such  matters.  The 
State  Tax  Ciommission  has  such  power.^ 

Pereonal  Property  Aeeessments 

The  assessments  of  personal  property  are  made  public  on 
October  1,  also,  and  continue  open  until  November  30.  For 
1927,  83,522  names  were  placed  on  the  tentative  rolls.  Of  these 
names  37,944  were  cancelled  on  application.  The  original  rolls 
amounted  to  $1,031,091,975,  but  more  than  two-thirds  were 
cancelled,  leaving  a  final  assessment  of  $297,983,750.  Much  of 
this  is  inevitable  under  the  present  circumstances.  The  assessors 
are  required  to  list  the  holdings  without  regard  for  exemptions. 
Names  are  taken  from  the  telephone  book,  the  social  register,  the 
United  States  income  tax  lists,  directories,  and  miscellaneous 
sources.  Residents  are  required  to  make  no  declaration  of 
thdr  own  imless  ai^iealiiig  from  assessm^ts  made  against 
them.  The  assessments  are  almost  wholly  arbitrary  and  the 
property  actually  listed  is  a  motley  mass  of  miscellaneous 
items. 

This  assessment  is  presumed  to  include  all  chattels,  with  the 
exception  of  automobiles  and  household  goods  to  the  value  of 

$1,000.  The  tax  does  not  extend  to  any  intangible  personalty. 
The  tax  is  leviable  not  at  the  situs  of  the  property,  but  at  the 
l^al  residence  of  the  owner  if  within  the  State.  Moreover, 
persons  assessed  are  permitted  to  deduct  tiieir  debts,  including 
mortgage  bonds  which  they  have  signed.  The  personalty  of 
mercantile  and  manufacturing  corporations  is  not  assessed  by 
the  city  but  it  is  taxed  by  the  State  under  Article  d-A,  the  fran- 
diise  tax  baaed  on  net  income. 


^Laws  of  1924,  e.  m,  13. 


174 


Nbw  Yobx  Csft's  Finahcis  and 


Annual  Report  of  the  Department  of  Taxes 

The  annual  report  of  the  ConunissionerB  of  Taxes  and  Assess- 
mmts  is  one  of  the  most  inf onnaUve  of  the  reports  of  the  City  of 
New  York.  It  is  the  most  important  report  dealing  with  the 
taxes,  tax  rates,  values,  and  economic  changes  within  the  city. 
The  present  report  is  to  be  commended  for  its  brevity,  for  its 
tables  showing  values,  tas^s,  and  tax  rates  for  previous  yeaiB,  for 
its  maps,  and  for  following  the  same  general  form  from  year  to 
year.  It  is  thus  possible  to  turn  from  one  report  to  another 
without  confusion.  The  practice,  however,  of  presenting  statis- 
tical material  dealing  with  sale  values  as  compared  with  assessed 
values  has  been  discontinued.  Material  of  this  sort  is,  neverthe- 
less, essential  in  the  work  of  assessment,  and  should  be  presented 
in  the  annual  report.  As  in  the  case  of  other  city  departments, 
it  is  important  to  have  the  annual  report  appear  early  in  the  year. 
Hie  tax  books  are  closed  and  the  taxes  levied  by  March  1,  and 
the  r^xxrt  should  be  issued  immediately  thereafter. 

Special  Assessments  fob  Locsal  Imfbovsmemtb 

New  York  City  secures  from  3  to  5  per  cent,  of  its  revenues  from 
special  assessments.  The  amount  differs  from  year  to  year  be- 
cause it  depends  upon  the  amount  of  assessable  improvements 
constructed.  During  the  war  years,  for  example,  the  amount  was 
imusually  low.  The  largest  amount  received  in  any  one  year  is 
that  shown  for  1926,  and  amounts  to  $20,500,000.^  There  should 
be  added  to  this  sum  approximatdy  $8,000,000,  on  account  of 
general  assessments  collected  with  the  regular  taxes  upon  real 
estate.  These  citywide  and  boroughwide  assessments  are  some- 
what peculiar  to  New  York  City,  and  are  described  below.  In 
all  tabulations  of  city  revenues,  tinesy  appear  as  part  of  the  general 
property  taxes  because  they  are  so  shown  in  the  Comptroller's 
Annual  Report  and  because  they  are,  after  all,  a  general  burden 
upon  real  estate,  levied  in  proportion  to  the  value  of  land  and 
building?,  without  any  referaice  to  the  individual  beo^ts  de- 
rived by  the  land,  except  as  these  are  of  a  very  general  nature. 


Financial  Administration:  Assbssmbniib 


175 


If  the  total  amount  of  assessments  of  all  kinds  is  placed  at  $28,- 
500,000  for  1926,  this  increases  the  proportion  of  revenues  derived 
from  assessments  to  5.74  per  cent,  of  the  total  revenues  for  the 
year,  and  reduces  the  amount  from  general  property  taxes  to 
68.90  per  cent.^  Special  assessments  thus  become  the  third 
largest  source  of  city  revenue  in  1926.  They  are  smaller  than  the 
general  property  taxes  and  the  city's  share  of  state  taxes. 

Three  Types  of  Assessments 

There  are  in  New  York  City  three  well-defined  kinds  of  special 
assessments.  These  are: 

1.  Assessments  upon  particular  pieces  of  land  for  benefits 
arising  from  local  improvements,  such  as  temporary  and  perma- 
nent pavements,  sidewalks,  gutters,  curbs,  gradings,  sanitary  and 
storm  sewers,  disposal  plants,  traffic  tunnels  and  steps,  grade- 
crossing  eliminations,  viaducts,  drainage,  mosquito  extermina- 
tion, and  all  similar  improvements  which  do  not  involve  the  taking 
of  private  land  by  the  city.* 

2.  Assessments  upon  particular  pieces  of  land  for  benefits 
arising  from  the  acquisition  by  the  city  of  real  property  for  the 
opening,  widening,  or  straightening  of  streets,  alleys,  or  courts, 
for  parks,  parkways,  playgrounds,  bridges,  tunnels,  docks,  water- 
front improvements,  or  for  any  other  purpose  which  will  serve 
public  utility,  comfort,  health,  enjoyment,  or  adornment.' 

3.  Assessments  upon  the  city  at  large,  or  upon  one  or  more 
boroughs,  or  upon  parts  of  boroughs,  for  improvements  or  the 
acquisition  of  property  such  as  those  involved  in  the  Riverside 
Park  development,  or  for  a  share  of  the  cost  of  these  improve- 
ments, to  be  levied  and  collected  from  the  ta3q>ayers  of  the  area 
assessed  together  with  the  regular  real  estate  taxes.^ 

Each  kind  of  special  assessment  has  its  own  agency  and  pro- 
cedure of  administration.  Assessments  for  local  improvements, 
the  first  class,  are  handled  primarily  by  the  Board  of  Assessors 
and  the  Board  of  Revision  of  Assessment.  Assessments  of  the 
second  class,  involving  condenmation,  are  made  by  the  courts  on 

1  Cf,  Table  III,  p.  137.  '  Charter,  Section  970  flf. 

•Charter,  Seetkm  943  ff.  « Charter,  Section  247. 


176 


Nsw  YoBX  Ctet's  Financbs  and 


the  basis  of  assessment  roUs  prepared  ehie5y  by  the  Bureau  of 
Street  Openings  of  the  Law  Department.  Assessments  upon  the 
city  or  upon  the  boroughs  are  determined  by  the  Board  of  Esti- 
mate and  Apportionment,  which  has  important  functions  also  in 
each  of  the  other  cases,  on  the  basis  of  recommendations  of  its 
Chief  Engmeer.  The  levies  are  fixed  automatically  in  accordance 
with  the  assessments  made  for  the  general  property  tax  and  are 
paid  with  that  tax.  This  extremely  complicated  situation  may 
be  better  understood  through  a  dbcussion  of  eadi  irf  these 
ag^cies  and  its  work. 

The  Boasd  of  Assibssobs  and  ths  Bqabd  of  Bbvibion  or 

AflSESSlfSNT 

The  Board  of  Assessors  prepares  the  assessment  levies  for  all 
local  improvements,  such  as  the  building  of  sewers,  grading  and 
paving  of  streets,  and  the  laying  of  curbs  and  sidewalks.  The 
Board  consists  of  three  members  appointed  and  removable  by 
the  Mayor.  1  The  chairman  receives  $6,500  a  year;  the  other  two 
assessors  S6,000.  The  Board  of  Revision  of  Assessment  consists 
of  the  Comptroller,  the  Cori)oration  Counsel,  and  the  President 
of  the  Department  of  Taxes  and  Assessments,  ex  officio.* 

Initiation  of  Local  Improvementa 

Ix>cal  improvements  originate  with  the  local  improvement 
boards  of  the  various  districts  of  the  city,  usually  upon  applica- 
tion of  property  owners  in  the  district.  There  are  about  30  such 
lystriets.  They  usually  emlmoe  three  adjoining  aldermanic  dis- 
tricts and  the  board  is  composed  of  the  three  aldermen.  These 
boards  meet  at  stated  intervals  at  the  call  of  the  secretary  to 
the  Borough  President,  and  hear  applications  from  property 
owners.  The  boards  have  poweap  to  instruct  the  Borough  Presi- 
dent to  proceed  with  improvements,  costing  less  than  $5,000 
where  the  cost  is  to  be  borne  by  the  local  property  owners.  Such 
improvements  may  be  proposed  directly  by  the  Borough  Presir 
dent  or  the  Board  of  Estimate  waxy  itself  initiate  them.  When 

^  Charter,  Section  942.  <  Charter,  Seetioa  944. 


Financial  Administration:  Assessments  177 


an  improvement  has  been  authorized^  the  engineers  in  the  Bor- 
ough President's  office  prepare  a  report  on  the  cost  of  die  project 
and  submit  it  to  the  Board  of  Estimate  and  Apportionment. 
The  report  is  then  referred  to  the  Chief  Engineer  of  the  Board  of 
Estimate  and  Apportionment  for  his  report.  On  his  approval, 
the  Board  of  Estimate  authorises  the  Borough  President  to  let 
a  contract  for  the  work.  In  case  of  sewers,  the  Board  of  Esti- 
mate, at  the  time  it  authorizes  the  work,  maps  out  the  area  to  be 
assessed. 

Procedure  of  Special  Assessment 

When  the  work  is  complete,  the  Borough  President  submits  to 

the  Board  of  Assessors  a  docket  recording  the  action  of  the  local 
improvement  board,  the  decisions  of  the  Board  of  Estimate  and 
of  the  Chief  Engineer,  and  a  statement  of  the  complete  cost  of  the 
improv^ent  and  of  the  contract  with  the  private  contractor. 
The  following  items  of  cost  are  included:  the  contract,  the  cost  of 
calculation  by  the  Board  of  Assessors,  interest,  the  expense  of  the 
Borough  President's  office  for  engineering,  labor  and  inspection. 
The  report  is  also  accompanied  by  copies  of  the  tax  maps  of  the 
area  adjacent  to  the  improvement.  On  these  maps  are  entered 
the  house  and  lot  numbers  and  a  complete  description  of  the  work 
performed.  The  docket  also  includes  a  list  of  the  lot  and  block 
numbers  and  the  last  known  owner  of  each.  This  information 
IS  obtained  from  the  Department  of  Taxes  and  Assessments. 

The  work  of  the  Board  of  Assessors  is  largely  one  of  calculation 
and  computation.  The  Charter  requires  the  full  cost  of  the  im- 
provement to  be  levied  on  the  benefited  property  unless  epedal 
provision  has  been  made  to  the  contrary.  The  assessment,  how- 
ever, may  not  exceed  the  benefit  to  the  property,  nor  may  it  exceed 
one-half  of  the  fair  valuation  of  the  property  (Charter,  Section 

947).  The  oomputorB  in  the  office  of  the  Boajxi  of  Assessors  pre- 
pare a  property  list  arranged  by  lot  and  block  and  apportion  the 
cost.  Special  rules  are  apphed  to  pavements,  curbing,  sidewalks, 
sewers,  etc. 

Upon  the  oompletion  of  the  assessment  list,  notice  is  given  to 
the  public  thiou|^  publication  in  the  City  Record  and  the  cor- 


178  New  York  City*s  Financbs  ani> 


poration  newspapers  in  Brooklyn,  and  public  inspection  is  in- 
vited at  the  Board's  ofl&ces  for  30  days.  Objection  must  be  made 
in  writing  within  this  period.  At  the  expiration  of  the  30  days, 
a  hearing  is  held.  If  there  is  no  objection  or  if  alterations  aie 
made  by  the  Board  to  suit  the  objectors,  the  Board  has  authority 
to  confinn  the  list  and  transmit  it  to  the  Comptroller  for  collection. 

Where  objection  is  made  and  the  Board  does  not  accept  the 
changes  asked  by  the  objectors,  the  Board  must  present  the 
assessment  and  the  objections  to  the  Board  of  Revision  of  Assess- 
ment. The  members  of  this  appeal  board  are  in  practice  all 
represented  by  their  deputies.  The  latter  board  may  confirm  or 
refer  back  to  the  Board  of  Assessors  for  correction.  Unless  the 
Board  of  Revision  of  Assessment  acts  within  30  days,  it  is  deemed 
to  have  confirmed  the  assessment.  Lists  returned  to  the  assessors 
are  again  certified  to  the  Board  of  Revision  of  Assessment  for 
confirmation.^  Few  objections  are  actually  made.  In  1925  only 
18  of  the  591  lists  prepared  were  reviewed  by  the  Board  of 
Revision.  The  courts  have  power  to  review  assessments  only  in 
case  of  ^^fraud  or  substantial  error."^  The  Comptroller  may,  with 
the  writt^  advice  of  the  Corporation  Counsel,  compromise 
assessm^t  claims,  or  with  the  latter's  written  advice  and  con- 
sent, cancel  void  assessments.' 

Nature  and  Volume  of  Work  of  Assessors 

During  the  year  1925,  656  assessment  lists  were  prepared  of 
which  591  had  been  confirmed  by  the  close  of  the  year.  Of 

these  231  were  for  sewers,  131  for  grading,  and  229  for  paving. 
There  were  pending  83  lists  awaiting  interest  certificates  from 
the  Department  of  Finance  and  contracts  aggregating  $48,316,000 
w&e  in  process  of  apportionment.  The  lists  prepared  and  adver- 
tised during  the  year  embraced  79,430  parcels  of  property.  In 
1926,  the  assessments  confirmed  amounted  to  $27,161,785.  Local 
improvements  were  much  neglected  during  the  war  and  for  some 
years  to  come  the  volume  is  likdy  to  be  great. 

The  Board  of  Assessors  has  a  staff  of  about  36  clerks,  drafts- 
men, etc.,  only  a  few  of  whom  are  paid  over  $3,000.   All  of  its 

>  Oiarter,  Seetkm  M4.     >  Cluurter,  SeetioM  058^^     « Cauurter,  Seetkn  MS. 


Financial  Adionibtbation:  Assbssmenib  179 


employees  are  under  the  merit  system  except  the  secretary,  who 
receives  $4,000.  The  total  salary  biU  is  $96,000.  About  $2,800 
is  allowed  for  supplies  and  expenses  so  that  the  total  budget  is 
$99,296.  Of  this,  $59,200  is  charged  to  the  assessment  lists  pre- 
pared (in  practice  3  per  cent,  of  the  amount  of  each  contract)  and 
is  paid  from  the  street  improvement  fund  allowance.^ 

Damages  by  Reason  of  Grading  of  Streets 

The  Board  of  Assessors  also  makes  awards  on  claims  for  damages 
resulting  from  the  establishment  or  change  of  the  grades  of 
streets,  and  in  other  instances  on  certificate  of  the  Board  of 
Estimate.2  Unless  a  claim  m  writing  had  been  filed  with  the 
Board  within  90  days  after  the  completion  and  acceptance  of 
the  work  by  the  Borough  President,  no  award  for  change  of 
grade  damage  can  be  made.  Further,  in  order  to  obtain  an  award 
for  change  of  grade  damage,  an  owner  must  erect  his  building 
to  the  filed  grade  established  by  the  Board  of  Estimate  and 
Apportionment  for  the  street  in  question,  but,  if  a  grade  is  changed 
subsequent  to  the  erection  of  a  building,  an  owner  is  entitled  to 
an  award  for  change  of  grade  damage.  In  1924,  66  such  claims 
were  disallowed  and  360  granted  to  the  amoimt  of  $291,000.  In 
1925,  there  were  435  awards  which  totalled  $169,000. 

Bureau  of  Street  Openings,  Law  Department 

Besides  the  local  assessments  arising  from  street  improvemrats, 

there  is  another  type  of  assessment  involving  the  acquisition  by 
the  city  of  the  title  to  land  for  streets  and  parks.  The  work  is 
handled  by  a  special  force  m  the  Bureau  of  Street  Openings  of 
the  Law  Department.  This  stafif,  headed  by  an  assistant  cor- 
poration counsel,  consists  of  71  employees.  There  are  three 
divisions  of  this  bureau.  The  main  office  in  Manhattan  handles 
most  of  the  work  but  Brooklyn  has  an  entirely  separate  staff,  and 
there  is  a  division  in  Queens  for  trial  work  only.  All  of  these 
forces  are  paid  out  of  the  Street  and  Park  Opening  fund.  The 

1  Budget  of  1927;  Charter,  Seetioii  181. 
•  Ghirter,  Seetioii  05L 


180 


Nbw  Yobk  Citt'b  Fof  angu  and 


present  budget  anticipates  an  aUowanoe  of  $224,623  for  the 
salaries  of  this  staff  —  more  than  twice  the  cost  of  the  Board  of 

Assessors. 

As  in  the  case  of  local  improvements  the  matters  originate 
with  the  local  improvement  boards  or  with  the  Borough  President 
or,  in  some  cases,  with  the  Board  of  Estunate  itself.  The  Board 
authorizes  the  acquisition  and  directs  the  Law  Department  to 
begin  condemnation  proceedings  in  the  courts.  The  Bureau  of 
Street  Openings  thus  acts  first  as  the  ag^t  of  the  Board  of 
Estimate  to  bring  the  proceedings  under  powers  granted  the 
city  by  section  970  of  the  Charter.  The  Supreme  Court  handles 
these  cases  without  a  juiy.^  Once  the  Court  has  taken  juris- 
diction, the  Bureau  acts  thereafter  as  the  clerk  or  agent  of  the 
Court  as  well  as  of  the  city. 

The  work  involves  two  phases.  The  land  has  first  to  be  ac- 
quired and  the  awards  made  for  the  damages  sustained  by  the 
property  owners  who  are  forced  to  surroider.  The  Board  <rf 
Estimate  approves  two  maps:  a  rule  map  showing  the  metes  and 
bounds  of  the  land  to  be  acquired,  and  a  damage  map  of  lots  to 
be  included  in  whole  or  in  part  in  the  acquisition.  The  Board, 
usually  at  the  same  time,  approves  a  map  of  the  assessment  area 
and  detmnines  what  part,  if  any,  shall  be  borne  by  the  city  or 
borough  as  a  whole,  under  section  247  of  the  Charter.  These 
maps  are  furnished  by  the  engineering  staffs  of  the  Borough 
Presidents.  The  Bureau  of  Street  Openin^Ei  advertises  the 
pK>jects  and  initiates  the  prooeedmgs  hdore  the  Court.  The 
Court  must  first  be  satisfied  as  to  the  merits  of  the  project  and 
approve  the  proposed  condemnation.  After  advertisement  fur- 
ther proceedings  are  then  held  and  the  property  owners  pvesent 
their  claims  for  damages.  The  Law  Departmoit  i^^msentative 
presents  the  city's  case  and  the  judge,  after  a  trial,  and  a  personal 
viewing  of  the  property  makes  the  awards  on  the  basis  of  the 
claims  substantiated.  This  money  is  pi^aUe  from  the  street 
improvement  fimd  after  the  final  deevee. 

At  the  same  time  that  street  or  park  land  is  being  acquired,  the 
Court  must  distribute  the  full  cost  of  the  proceeding,  or  such 

>  Cauffter,  SeetioM  MIMINIB. 


Financial  Adminibibation:  Assbssmentb  ISl 


portion  of  it  as  is  to  be  assessed  upon  the  baiefited  property. 

This  applies  not  only  to  the  amounts  granted  in  damages  but  to 
the  cost  of  preparing  papers,  instituting  and  conducting  pro- 
ceedings, computing  costs,  and  interest  from  the  date  of  resting 
title  to  the  date  of  the  final  decree  of  the  Court.  This  is  ccanr 
puted  by  the  Bureau  of  Street  Openings.  The  Bureau  now 
prepares  for  the  court  a  preliminary  decree  or  proposal  for  distrib- 
uting the  cost.  A  copy  of  this  is  placed  in  the  County  Clerk's 
office  for  examination  by  property  owners.  The  Court  then  hc^ds 
a  final  hearing  and  later  signs  a  decree  or  order  assessmg  upon 
the  property  benefited  the  whole  cost  of  the  project  with  interest 
to  the  date  of  the  decree.  The  final  sum  included  in  this  decree 
may  not  exceed  the  amoimt  of  the  preliminary  decree.  In  order 
to  provide  for  interest  and  costs  resulting  from  unduly  protracted 
proceedings,  a  contingency  item  is  included  in  the  tentative 
calculations. 

The  final  decree,  issued  15  days  later,  is  prepared  in  tripHcate. 
One  copy  is  placed  on  file  with  the  county  clerk,  another  goes  to 

the  Law  Department,  and  the  third  is  transmitted  to  the  Bureau 
of  City  Collections  in  the  Finance  Department.  Collection  is 
thereafter  handled  in  the  same  fashion  as  other  assessments.  If 
not  paid  within  60  days,  these  assessmmts  become  lims  upon 
the  property. 

Genebal  Assessments 

The  Board  of  Estimate  and  Apportionment  has  authority  under 

Section  247  of  the  Charter,  conmionly  known  as  the  Gerhart  Law 
(1916),  to  provide  that  all  or  part  of  the  cost  of  land  or  public 
improvements,  mich  as  sewers,  streets,  bridge  plazas,  and  water 
front  developments,  shall  be  a  general  assesonent  upon  one  or 
more  of  the  boroughs,  or  upon  the  city  at  large.  The  Board  de- 
termines the  percentage  of  the  cost  to  be  borne  by  the  locality, 
by  the  borough,  and  by  the  city,  and  also  whether  these  assess- 
ments shall  be  cdlected  in  one  year  or  in  annual  mstallments, 
spread  over  not  more  than  five  years.  This  general  assessment 
is  a  somewhat  unique  arrangement.  These  additional  levies 
aie  not  legaided  as  subject  to  the  tax  limit. 


182 


New  Yobk  Cmr's  Finangbs  and 


Assessments  of  this  character  are  certified  to  the  Comptroller 
and  reported  by  him  to  the  Board  of  Aldermen  for  inclusion  in 
the  tax  levy.  In  1927,  for  example,  $8,040,752.66  was  added  to 
the  tax  levy.  In  Manhattan,  Bronx,  and  Queeaos  this  ad<tod  .04 
to  the  tax  rate  on  each  one  hundred  dollars  of  valuation;  in 
Brooklyn  the  figure  was  .07. 

This  provision  of  law  is  used  in  two  classes  of  cases.  The  first 
represents  huge  general  improvements,  such  as  the  Riverside 
Drive  improvement,  Jamaica  Bay  Boulevard,  Pelham  Bay  Park 
extension,  Inwood  Hill  Park  addition,  or  the  Coney  Island 
Boardwalk.  Here  the  undertakings  are  obviously  of  more  than 
local  benefit.  Yet  the  levy  of  100  per  cent,  upon  the  city  at 
large  —  the  policy  adopted  in  all  of  the  cases  mentioned  —  may 
overlook  certain  immediate  advantages  to  adjacent  property.  In 
the  second  place,  many  local  improvements  for  street  openings 
cost  more  than  can  be  raised  by  assessments  which  by  the  Charter 
must  not  exceed  50  per  cent,  of  the  fair  valuation.  In  some 
instancy,  by  delay  in  preparing  the  assessment,  or  by  reason 
of  anticipation  of  the  benefit,  the  property  increases  in  value 
because  of  the  improvement,  and  the  assessment  is  made  possible. 
In  many  cases,  however,  it  is  necessary  for  the  city  or  the  borou^ 
to  assume  part  of  the  cost. 

It  is  impossible  to  get  any  full  information  as  to  the  volume  and 
cost  of  projects  being  financed  in  this  way.  Many  of  the  under- 
takings involve  condemnation  of  land  and  this  renders  it  quite 
impossible  to  estimate  their  cost.  The  latest  figures » obtainable 
from  the  Chief  Engineer  of  the  Board  of  Estimate  indicate  that 
more  than  75  such  projects  are  in  process  of  execution.  The 
report  of  the  finance  committee  of  the  Board  of  Aldermen 
indicates  that  the  completed  projects  for  which  assessments  are 
bdng  collected  have  cost  over  forty  million  dollars.  Of  the  75 
uncompleted  undertakings,  more  than  50  are  in  Brooklyn  and 
Queens.  The  tendency  is  to  place  a  goodly  share  of  the  cost  on  the 
city  at  large.  In  47  cases  the  city  was  charged  with  25  per  tsmt. 
or  more  of  the  cost,  and  in  18  cases  the  city's  share  was  more  than 
50  per  cent. 

*  These  figures  are  as  of  July,  1827. 


Financial  Administration:  Assessments  183 


Collection  of  Assessments 

The  collection  of  assessments  after  the  certification  of  the 
lists  to  the  Comptroller  is  the  work  of  the  Bureau  of  Assessments 
and  Arrears  in  the  Finance  Department.  Assessments  upon 
being  confirmed  become  a  lien  ten  days  after  their  entry  in  the 
books  of  the  Collector  of  Assessments  and  Arrears.  Sixty  days 
from  the  date  of  entry  are  allowed  for  the  payment  of  such 
assessments  without  interest.  If  the  assessment  is  not  paid 
within  that  period,  interest  at  the  rate  of  7  per  cent,  per  annum 
is  charged  from  the  date  on  which  the  assessm^t  became  a  lien. 
If  an  assessment  exceeds  3  per  cent,  of  the  assessed  value  of  the 
land,  it  may,  upon  application  to  the  City  Collector  be  paid  in 
ten  anniiAl  installments,  with  interest  at  the  rate  of  5  per  cent, 
pier  annum  on  the  unpaid  bsdances. 

An  amendment  of  the  Charter  reo^tly  made  by  the  Municipal 
Assembly  permits  the  Board  of  Assessors  to  levy  assessments  for 
public  improvements,  when  a  portion  of  the  cost  is  to  be  borne  by 
a  borough  or  by  the  city  at  large,  immediately  upon  the  registra- 
tkm  of  the  contract  by  the  Comptroller.  Contracts  of  this 
category  were  for  the  Coney  Island  boardwalk,  and  the  grading 
and  paving  of  Queens  Boulevard  and  Hylan  Boulevard  in  Rich- 
mond. The  total  cost  of  these  proceedings  amounted  to  $6,340,- 
000.  This  procedure  will  e:q>edite  the  collection  of  assessmmts 
of  this  character. 

Assessments  become  a  lien  ten  days  after  they  are  entered  on 
the  records  of  these  offices.^  The  Comptroller  is  permitted  to 
issue  ten  year  assessment  bonds  for  the  street  improv^^^t  fund 
to  pay  for  assessable  improvements;  the  moneys  collected  on 
assessments  are  therefore  paid  over  to  this  fund.^  On  December 
31,  1925,  there  were  $55,750,000  outstanding  in  assessment 
bonds.  During  1925  it  had  been  necessary  to  borrow  $1,690,000 
for  this  fund  to  meet  assessmmt  dtfmencies  and  to  issue  $20,000- 
000  in  assessment  bonds  (taken  by  city  sinkmg  funds.  3)  On 
December  31,  1925,  there  were  outstanding  uncollected  assess- 

1  Charter,  Section  159. 

•  Qiarter,  Section  181. 

*  CampbroOer's  Report  far  19U,  pp.  340, 8S0,  and  165. 


184 


Nsw  YoBK  drr's  Financbs 


nmts  amounting  to  $24,234,500  of  which  over  $10,000,000  dates 
back  to  1923  or  earlier.  The  fund  had  also  made  advances 
totaling  $37,234,000  on  contracts  completed  or  partially  com- 
I^eted.  The  total  outlay  in  advance  of  ooUeetkm  was  $61,468|000.^ 


Bxe$89  Condemnation 

In  1913  the  State  Constitution  was  amended  to  permit  excess 
condemnation.  ''The  l^islature  may  authorize  a  dty  to  take 
more  land  than  is  needed  for  actual  construction  in  the  laying 
out,  widening,  extending,  or  relocating  parks,  pubUc  places,  high- 
ways,  and  streets;  provided,  however,  that  the  additional  land 
and  property  so  authoriaed  to  be  taken  shall  be  no  more  than 
sufficient  to  form  suitable  building  sites  abutting  on  such  park, 
pubhc  place,  highway,  or  street.  After  so  much  of  the  land  and 
property  has  been  appropriated  for  such  park,  public  place, 
highway  or  street  as  is  needed  therrfor,  the  remainder  may  be 
9cAd  or  leased."* 

The  Charter  was  amended  in  1916,  and  this  power  was  con- 
ferred upon  New  York  City.  The  Charter  provision  makes  it 
clear  that  the  whole  property  must  be  acquired  when  the  project 
is  begun.'  This  power  has  been  used  numerous  times,  for  ex- 
ample, in  connection  with  the  development  of  a  civic  center, 
about  the  new  Court  House,  in  connection  with  the  Eighth  Avenue 
Subway,  and  in  the  vicinity  of  the  Sixth  Avenue  Extension.  The 
latest  proposal  has  been  to  use  it  to  acquire  land  for  the  new 
housing  projects. 

1  Ibid.,  p.  349. 

*  Constitution  Article  I,  §7. 

*  Charter.  Sections  970-a  and  970-b.  This  was  added  by  Laws  of  1916,  Chapter 
113. 


CHAPTER  Vn 


NEW  YORK  CITY'S  DEBT  POLICIES 

On  January  1,  1927,  New  York  City's  gross  debt  had  reached 
$1,880,436,000.^  The  mere  size  of  the  figure  is  arresting.  As 
the  city's  debt  has  grown,  it  has  become  more  and  more  compU- 
cated.  Few  othor,  if  any,  govmimental  units  have  outstanding 
obligations  of  so  many  varieties,  amortized  in  such  different  ways. 
The  city  has  a  pre-consolidation  debt,  supported  by  three  obso- 
lescent sinking  funds.  The  largest  of  these  fimds  holds  "General 
Fond  Bonds  "of  the  city.  Interest  is  paid  from  the  General  Fund, 
but  the  transaction  is  merely  on  paper.  The  post-consolidation 
debt  is  distributed  among  three  sinking  funds.  These  funds  are 
entirely  invested  in  the  city's  bonds.  The  city  also  issues  Serial 
Bonds.  Three  forms  ot  temporary  indd>tedness  are  used.  The 
dty  incurs  its  pmnanent  obligations  in  the  shadow  of  a  consti- 
tutional debt  limit  of  10  per  cent,  of  assessed  real  estate  valuations; 
it  issues  its  temporary  obligations  in  the  penumbra  of  a  2  per  cent, 
tax  limitation.  An  emasculated  "pay-aa-you-go"  law  fed>ly 
attempts  to  Umit  long-tmn  borrowing  to  sdf Hsustaining  im- 
provements. liQgal  perplexities  and  fiscal  comphcations  go  hand 
in  hand. 

The  temporary  debt  of  the  dty  embraces  but  4  per  cent,  of 
the  total  outstanding  obligati<»is.  It  is  in  three  forms.  Revmue 
Bills  are  issued  m  anticipation  of  taxes,^  to  meet  expenditures 
authorized  in  the  budget,  and  are  redeemable  from  the  revenues  of 
the  same  year.  Special  Revenue  Bonds  are  issued  to  meet  certain 
emergency  and  mandatory  expenditures  not  included  in  the 
budget."  Tax  Notes,  since  1915,  have  been  issued  in  order  to 
finance  expenditures  for  permanent  improvements.  Special 

^  Throughout  this  chapter,  unless  specifically  noted,  "Qeneral  F\md  Bonds"  m 
not  included  in  the  totals.   The  reasons  aie  outlined  below.  See  p.  19^ 
s  Charter,  Section  187. 

186 


186 


Nuw  YoBK  Ctpt's  Finances  and 


TABLE  I 


Indebtedness  of  the  City  of  New  York  as  op  Dbcembeb  31,  1926^ 

(In  thousands  of  dollars) 


TllllBllSIMiaM 

Sinking  Fund 
Ambts 

Nbt 

Long-Term   Indebtedness  (Coiporate 
Stock,  Serial  Bonds,  and  Corporate 
Stock  Notes) 
General  Purposes  

Water  

Docks  

Assessment  

Total   

Ten^Dotaiy  Xndebtedneas 

Revenue  Bonds  

Special  Revalue  Bonds  and  Bills 
Tax  Notes  

Total  

Total  Bonded  Indebtedness    .  . 

Cantract  and  Land  Liabilities  and 
Miscellaneous  Minor  Items  .... 

Giand  Total  

$  817,353 
351,604 
284,703 

145,798 
61,532 

$171,079 
5,838 
34,856 
24,035 
53,886 

$  646,274 
345,766 
249,846 
121,763 
7,646 

$1,660,993 

$289,695 

$1,371,298 

$  20,000 

28,125 
16,500 

$  20,000 

28,125 
16,500 

$  64,625 

$  64,625 

$1,725,618 

$289,695 

$1,435,923 

$  164,818 

$  4,490> 

$  160,328 

$1,880,436 

$294,185 

$1,596,251 

Revenue  Bonds  (with  certain  exceptions)  and  Tax  Notes  must 
be  redeoned  by  appiopiiatioiis  in  the  budget  of  the  succeeding 
year.' 

Six  per  cent,  of  the  city's  indebtedness  is  unfunded,  and  is  in 
the  form  of  "contract  and  land  habiUties."  Contract  liabilities 
are  ''for  work  and  labor  to  be  performed  or  material  to  be  fiir- 
niidied  under  contracts  for  public  improvements,"  for  the  pay- 
ment of  which  Corporate  Stock  has  been  authorized.  Land 
Uabihties  are  obhgations  to  pay  for  land  which  is  to  be  condemned. 
They  are  not  r^uxled  as  liabilities  until  title  has  vested  in  the 

>  Compiled  from  the  Comptroller's  Statement  on  the  Debt  Incurring  Power,  as  of 
Jamuary  i,  1927,  and  AprU  1, 1927,  pp.  6  and  13.  This  table  does  not  include  General 
Fund  Bonds  for  the  reason  discussed  in  the  tesrt  on  p.  196. 

*  Gash  available  for  the  liabilities,  not  in  Siiiking  Fkmds. 

» See  above,  p.  28. 


Financial  AniiiNiffiBATioN:  Debt 


187 


city.  The  amounts  involved  in  both  cases  are  registered  on  the 

books  as  "contract  and  land  liabilities."  They  are  contingent 
obhgations  and  must  be  included  in  computing  the  city's  debt 
margm.  It  is  not  necessary,  however,  to  discuss  them  here,  for 
as  quickly  as  possible  they  are  converted  into  Corporate  Stock  or 
Serial  Bonds. 

The  long-term  funded  debt  of  the  city  (90  per  cent,  of  the 
total  debt)  consists  of  three  kinds  of  bonds:  Corporate  Stock/ 
generally  issued  for  a  tmn  of  fifty  years;  Smal  Bonds  of  some* 
what  shorter  terms,  and  Assessm^t  Bonds  with  maturities  of 
ten  years  or  less.*  The  present  study  relates  only  to  indebtedness 
incurred  on  account  of  expenditures  for  permanent  improve- 
ments —  that  is,  long-term  indebtedness  and  Tax  Notes  required 
by  the  ''pay-as-you-go"  law  of  1916.  For  several  years  the 
annual  borrowings  of  this  character  have  exceeded  $100,000,000. 
Such  expenditures  very  largely  condition  the  future  growth  and 
proq)erity  of  the  city. 

Borrowing  by  New  York  City  is  usually  preceded  by  the 
issuance  of  Corporate  Stock  Notes.  Long-term  obhgations, 
therefore,  are  not  issued  until  the  expenditures  have  been  made. 
Such  an  arrangement  is  more  economical  than  that  obtaining  in 
many  cities  which  issue  bonds  when  the  project  is  authorized, 
and  in  advance  of  its  execution.  The  practice  followed  by  New 
York  City  makes  unnecessary  the  maintenance  of  large  cash 
balances,  and  the  premature  payment  of  interest  on  bonds.  The 
dty  also  may  choose  the  most  favorable  time  for  the  issuance  of 
its  long-term  stock  or  bonds.  It  may  put  its  obligations  on  the 
market  in  large  blocks  of  fifty  or  sixty  miUion  dollars  which 
attract  active  bidding.' 

^The  term  is  confusing.  Corporate  Stock  is  nothing  more  than  term  bonds. 
Thioughout  this  discussion.  Corporate  Stock  and  Bonds  {u  e,,  non-serial  bonds)  will 
be  used  interchangeably. 

*  These  Assessment  Bonds  are  at  present  all  being  sold  to  city  sinking  funds. 

» Should  no  sale  of  long-term  stock  occur  before  their  maturity.  Corporate  Stock 
Notes  may  be  renewed  and  the  roiewals  rede^ed  from  the  next  sale  of  the  stock. 
The  total  amount  of  sudi  notes  and  renewals  must  at  no  time  exceed  four-fifths  of 
the  amount  of  Corporate  Stock  or  Serial  Bonds  authorized  to  be  issued  (Section  189 
of  the  CSiarter).  There  was  $109,795,000  of  these  notes  outstanding  Jan.  1,  1927. 
TiMse  wwe  laisely  retired  from  the  proceeds  of  the  bond  sales  early  this  year. 


188 


New  Yobk  City's  Finances  and 


The  principal  concern  of  the  present  discuasion  is  with  the 
amount  of  the  city's  outstanding  obligations,  the  purposes  for 
which  the  indebtedness  was  incurred,  the  limitations  imposed 
upon  the  city  by  the  State  Constitution,  the  extent  to  which  the 
"pay-as-you-go"  law  has  been  followed,  the  borrowing  policies 
which  are  being  adhered  to,  and  the  tmns  of  the  corpcmte  stock 
or  emal  bonds  which  have  been  issued.  The  problems  posed  by 
New  York  City's  debt  can  be  better  understood,  however,  if  a 
brief  review  is  given  of  the  city's  past  experience.  The  purposes 
for  which  long-term  indebtedness  was  incurred  before  consolida^ 
tion  are  a  nice  index  ot  the  principal  problons  which  confronted 
the  city  during  the  previous  century.  The  city's  services  and 
needs  are  mirrored  in  the  recurring  periods  of  stringency  and  of 
large  scale  borrowing.  The  emergencies  have  dffiored,  and  the 
emphasis  has  shifted  frcnn  period  to  period. 

Growth  of  New  Yobk  City's  Debt 

The  city  borrowed  money  as  early  as  1750.  These  loans  were 
incurred  for  the  construction  of  docks  and  public  buildings,  and 
the  purchase  of  anps  for  the  cok»ual  wars  and  the  War  of  Inde- 
pendence.1  The  terms  were  relatively  short;  and  the  debts  were 
regarded  as  tanporary  expedients.  The  city,  however,  found 
itself  compelled  to  renew  the  loans,  and  refund  the  bonds.  The 
result  was  that  at  the  close  of  the  eighteenth  caitury,  the  dty 

had  an  indebtedness  which  for  that  time  was  substantia.  Special 
powers  were  therefore  secured  from  the  Legislature  in  1812^  to 
facilitate  the  Uquidation  of  this  debt.  The  city  set  up  a  sink- 
mg  fund  to  which  certain  specific  revenues  were  pledged.  In 
the  twenties,  when  the  debt  had  been  only  partly  Hquidated,  the 
city  incuned  new  obligations,  principaUy  for  the  construction  of 
markets  and  the  purchase  of  Blackwell's  Island.*  Up  to  this 
point  borrowing  had  been  sporadic.  Since  then  it  has  been 
frequent,  and  on  an  increasing  scale.  The  dty  has  be^  forced 

'Act  of  June  8.  1812. 

•  Aete  of  MMeh  24»  182(V  and  Ifarcli  26^  1828. 


Financial  Adbonibtration:  Dxbt 


189 


to  pile  up  a  larger  and  larger  indd[>tednes8.    Hardly  a  year  has 

passed  without  the  incurrence  of  new  obligations. 

CHART  I 

Growth  op  New  York  City's  Debt,  1860-1926 


I 
I 


IILII   '  III'    IIIMJ  '^^"^'^^ 

Chart  I  shows  the  growth  of  New  York  City's  debt  during  the 
last  hundred  years.  The  increase  has  been  by  cycles.  From 
1835  to  1842  the  Croton  water  S3r8tem  was  largely  responsible. 
In  1835  the  people  of  the  State,  through  a  popular  referendum, 
approved  a  loan  of  $5,500,000  for  the  construction  of  the  Croton 
water  works.  At  the  time,  this  seemed  a  staggering  sum,  but  the 
amount  voted  proved  to  be  insufficient,  and  only  three  years 
later  additional  loans  had  to  be  authorized.  The  total  cost  of 
six  years'  construction  amounted  to  approximately  $8,000,000. 
In  the  same  year,  1835,  a  great  fire  occurred,  and  bonds  were 
issued  to  offer  aid  to  its  victims.  These  bonds  w&e  redeemed 
before  1860.  From  1860  to  1865,  war  expenditures  required 
extraordinary  outlays.   These  bonds,  which  were  issued  in  aid 


190 


Nbw  Yobx  Crnr's  Financbs 


ct  the  f amilieB  of  volunteers  or  for  other  purposes,  were  liquidated 
before  1897.  The  period  from  1869  to  1874  was  Tweed's  heyday, 
and  the  debt  was  piled  high.  PubUc  buildings  were  a  favorite 
object  of  expenditure.  A  rdic  of  this  period  is,  of  course,  Tweed's 
Ck>uiity  Court  House.  Borrowing  for  school  construction  began 
in  1871.  Prior  to  that  time  school  buildings  had  been  financed 
directly  from  taxation,  but  in  1871  a  bond  issue  of  $200,000  was 
authorized.  Bridge  construction  appears  in  the  late  seventies. 
The  years,  however,  which  followed  Tweed's  '^liberalitsr"  weie 
years  of  retrenchment;  the  taxpayer's  pocketbook  was  being 
emptied  and  aversion  to  new  debts  was  great.  A  new  water 
supply  system,  and  the  necessity  of  providing  transit  facihties 
(1893-1914)  strained  the  city's  borrowing  powers.  The  World 
War,  as  will  be  explained  later,  postponed  many  needed  expendi- 
tures. Thereafter,  up  to  within  four  years  ago,  major  public 
improvements  were  almost  at  a  standstill. 

Objkcto  of  Indebtedness 

The  relative  importance  of  the  various  purposes  of  indebted- 
ness is  shown  on  Table  II  and  Chart  II,  as  of  the  years  1860, 
1897,  and  1926.  In  the  outstanding  indebtedness  of  1860  the 
water  supply  was  the  principal  item,  with  parks  coming  second. 
By  1897,  docks  and.  pubhc  buildings,  streets  and  sewers,  parks, 
schools  and  bridges  all  required  substantial  eq)enditures,  but, 
water  still  held  the  leading  place.  By  1926,  parks,  which  had 
been  second  in  importance  in  1860^  and  third  in  1897,  held 
the  eighth  position.  Rapid  transit  expenditures  topped  all 
others,  with  water,  schools,  streets  and  sewers  and  docks  fol- 
lowing in  the  order  mentioned.  Such  an  order  may  be  only 
temporary,  but  the  differences  in  the  amounts  of  indebtedness 
incurred  for  the  different  purposes  are  so  great,  and  the  city's 
borrowing  margin  is  so  limited,  that  some  time  must  elapse 
before  the  relative  positions  are  materially  modified.  It  should 
be  noted,  in  connection  with  the  1926  figures,  that  here,  as  through- 
out this  chapter,  no  account  is  taken  of  changing  price  levels. 

1  The  expenditures  for  paiks  began  in  the  fiftiai  with  the  aequisHion  of  land  for 
the  Gentna  Park. 


CHART  II 

Qbjbctb  09  Nmw  Ygbk  drr's  Indbbtbdnsss  in  1860,  1897  and  1926 


192 


New  York  City's  Finances  and 


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Financial  Administration:  Debt 


The  total  indebtedness  of  New  York  City,  however,  has  not 
grown  proportionately  more  rapidly  than  the  indd[)tedne88  of 
other  cities  in  the  United  States.  The  New  York  debt  reached 
high  levels  earlier,  but  this  was  natural,  for  the  city  had  a  large 
population  and  many  special  problems.  Three  rivers  that  must 
be  bridged  and  tunnelled,  outlying  boroughs  that  must  be  de- 
veloped, the  geography  of  the  principal  borough,  Manhattan— 
an  dongated  island  which  makes  it  impossible  to  converge  on 
centers  as  may  be  done  in  Paris  or  London  —  the  fact  that  ten 
miUion  people  live  within  a  radius  of  twenty-five  miles,  and  the 
demands  of  the  greatest  seaport  in  the  United  States  have  in- 
evitably forced  continually  mounting  expenditures. 

Sinking  Funds 

Eighty-five  per  cent,  of  the  city's  permanent  debt  is  Corporate 
Stock.  For  its  redemption  the  city  maintains  six  sinking  funds. 
Three  sinking  fimds  are  pledged  to  the  retirement  of  the  pre-con- 
soUdation  debts.  These  will  be  liquidated  within  the  next  two  to 
ten  years,  and  the  sinking  funds  will  then  be  discontinued.^  The 
three  funds  which  will  remain  will  be  the  Sinking  Fund  of  the  City 
of  New  York,  the  Water  Sinking  Fund,  and  the  Rapid  Transit 
Smking  Fund.  Table  lU  shows  that  each  of  the  sinking  funds 
has  accumulations  in  excess  of  its  requirem^ts.  Appropriations 
for  the  three  permanent  funds  are  made  annually  in  the  budget.* 

*  The  last  bonds  redeemable  from  the  Sinking  Fund  No,  1  are  due  in  1933;  the 
two  other  sinking  funds  (former  city  of  Brooklyn  indebtedness)  terminate  in  1937. 

■  These  three  sinking  funds  have  annual  revenues  amounting  to  approximately 
$18,560,000  of  which  $8,620,000  represents  interest  paid  from  the  City  Treasury  on 
dty  securities  held  by  these  ftinds  and  $9,160,000  the  budget  appropriation  for 
amortization.  The  balance  consists  of  subway  rentals,  interest  on  hmn^  balances, 
etc.    Comptroller's  Report  for  1926,  p.  324 

The  operation  of  these  sinking  funds  in  1926  is  shown  in  the  following  consoU- 
dftted  statement  which,  however,  does  not  include  Sinking  Fund  No.  1.  The  opera- 
tion of  this  fund  and  its  relation  to  the  General  Fund  are  discussed  on  p.  196. 

RECEIPTS  EXPENDITURES 

CM  «fi  Jkoni, /m.  1   $2,481,109  Investment  in  City  Securities. .  $42,402,925 

Surplus  Water  Rereuue  (BTdjm)   3,067,851  Redemption   1,381,950 

Subway  Rentals   570,957  Accrued  interest,  refunds,  etc. .  115116 

btOTMt  on  Bank  BaluMW   96,438  OMh  tebuiee  Dee.  31   6,846,965 

Revenue  from  Investments   9,300,120  •4ft  7iB  nKet 

Securities  redeemed  or  sold   25,040,297  •W./w.WQ 

Amofttntiott  ApiiraiiritttioD,  Bodsek.  9.105,000 

•iO.746.9i6 


194 


Nsw  YoBK  Cirr's  Financss  and 


TABLE  m 

Assets  and  Obligations  of  the  Sinking  Funds  as  of  Decembbb  31, 1826* 


(In  thousands  of  dollAn) 


Bonds 

Rba  rrvirr 
RSQCIBSO 

A  OTTT  A  T 
1  U  A  U 

ASSSTS 

Permanent  Sinking  Funds 
Sinking        of  tbe  CSty  d  New 

York 

Rapid  Transit  Sinking  Fund  of 
the  City  of  New  York  .     .  . 

Water  Sinking  Fund  of  the  City 
of  New  York  

243,170 

275,142 

Si  OA  CAO 

19,613 
38,459 

#196,697 
20,945 

39,818 

$  6,129 
1,331 

1,359 

Total  

Pre-ConsolidaHon  Sinking  Ftmds 
(Soon  to  be  Liquidated) 
Sinking  Fund  for  the  Redemption 
of  the  City  Debt,  No.  1    ,  . 
Siiikiiig  Fund  of  the  City  of 

Broddyn  

Water  Sinkms  ¥vaiA  of  tbe  C% 

11,242,026 

16,268 
4,173 
1,585 

$248,641 

15,194 
3,010 
1,187 

$257,461 

19,812 
7,576 
12,435 

$  8,820 

4,618 
4,565 
11,248 

Total  

$  22,026 

$  19,392 

$  39,824 

$20,432 

Gnnd  Total  

$1,264,953 

$268,033 

$297,285 

$29,252 

There  is  a  seventh  f und,  the  Sinking  Fund  for  the  Payment  of 
Interest  on  the  City  Debt,  which  is  not  a  true  sinking  fund.  Its 
revenues  are  derived  from  water  rates,  ferry  revenues,  rents,  and 
court  fees  and  fines.  The  surpluses  of  this  fund  go  into  Sinking 
Fund'No.  1.  These  amounts  have  been  increasing  rapidly.  In 
1926,  they  amounted  to  $17,400,000  out  of  the  fund's  total 
revenues  of  $19,134,000.« 

The  contributions  to  the  pre-consolidation  funds  are  not  actu- 
arially determined.  The  most  important  of  these  funds  is  the 
Snking  Fund  for  the  Redemption  of  City  Debt,  No.  1.  The 
remainder  of  the  entire  indebtedness  of  the  old  City  of  New  York 
is  to  be  paid  from  this  fund,  to  which  are  pledged  various  misoel- 

*  Excerpted  from  the  Comptroller's  Statement  on  the  Ddd  Incurring  Power  as  of 
January  1,  1927,  and  April  1,  IftW,  pp.  11-12.  ' 

*  This  fund  will  be  disoositiiiiied  when  Smkiiig  Flmd  No.  1  m  disoontiiiiMd  in 


Financial  Administration:  Debt 


195 


laneous  revenues  such  as  rents  from  docks  and  markets,  revenues 
from  the  franchises  of  street  railroads  and  minor  utihties,  and 
various  licenses  and  permits — in  all,  half  of  the  city's  miscellaneous 
revenues.  Such  a  scheme  of  building  up  a  sinking  fund  is  charac- 
teristic of  the  early  attitude  toward  amortization  of  municipal 
debts.  The  idea  was  borrowed  frcnn  the  English  practice  of  the 
eighteenth  century,  and  was  in  great  favor  until  about  half  a  cen- 
tury ago.  Today  it  is  gradually  being  abandoned.^  Before  con- 
solidation, New  York  on  occasion  accumulated  sinking  funds  in 
excess  of  their  actuarial  requirements.  These  sinking  funds 
contained  surpluses  which  could  not  be  used  for  the  amortisatim 
and  redemption  of  unconnected  items  of  indebtedness,  or  for 
current  expenditures.^  When  consohdation  took  place,  a  line  of 
demarcation  was  drawn  between  prior  and  subsequent  indebted- 
ness. The  eyisting  sinking  fund  was  left  intact.  Miscellaneous 
revenues  were  to  be  paid  into  it  as  before,  and  were  to  be  used 
exclusively  for  the  redemption  of  the  pre-consolidation  indebted- 
ness. It  was  feared  that  the  holders  of  the  old  bonds  might 
contest  the  legality  of  any  oth^  arrangement.  New  and  different 
sinking  funds,  however,  were  established  for  the  amortisation 
of  future  bond  issues. 

Oeneral  Fund  Bonds 

Sinking  Fund  No.  1  began  at  once  greatly  to  exceed  its  require- 
ments. Calculation  showed  that  by  the  time  the  last  bonds  were 
redeemed,  there  would  be  a  surplus  of  more  than  $300,000,000. 
There  was  an  embarrassment  of  unusable  riches.  A  scheme  was 
thmfore  devised  which  would  avoid  litigation,  but  which  would 
at  the  same  time  allow  the  surpluses  to  be  diverted  to  other 
purposes.  The  city  was  to  take  the  surplus  each  year  and  pay  it 

*  On  the  comparative  merits  of  sinking  funds  and  serial  bonds  there  may  be 
legitiiiiate  differences  of  opinion  (see  below,  p.  198).  If,  however,  a  sinking  fund  is 
used,  its  buildiiig  up  should  take  place  by  appropiiations  from  general  revenues  mther 
than  by  earmarking  specific  receipts.  Such  receipts  are  either  too  large  or  too  small 

precisely  to  meet  the  sinking  fund  requirement.  If  certain  sources  of  revalue  are  so 

pledged,  the  municipal  authorities  are  prevented  or  discouraged  from  revising 
charges,  for  the  increased  revenues  would  simply  go  into  the  sinking  fund. 

*  The  special  legislation  in  1878  did  not  relieve  this  situation.  See  E,  D,  Durand, 
The  Finances  of  New  York  City  (1898),  p.  306. 


196 


Nbw  Yobk  Cmr*8  Financbs  and 


into  the  General  Fund  for  the  reduction  of  taxes.  In  return,  the 
city  was  to  issue  annually  to  Sinking  Fund  No.  1  bonds  of  an 
equivalent  amoimt.  These  ''General  Fund  Bonds''  were  to  be 
held  by  the  Sinking  Fund  as  security  against  the  possibility  that 
its  accumulations  might  not  be  sufficient  to  retire  the  debt 
redeemable  from  it.^  If  the  debt  could  not  be  so  retired,  General 
Fund  Bonds  of  the  required  amount  were  to  be  sold^  and  the 
other  bonds  redeemed  from  the  proceeds  of  the  sale. 

During  the  first  year  of  the  system,  about  $8,500,000  was 
tak^  out  of  the  Sinking  Fund,  and  appHed  to  the  reduction  of 
taxation.  General  Fund  Bonds  of  this  amoimt  were  issued.  In 
1926  the  figure  was  $43,000,000  and  at  the  dose  of  that  year  the 
total  amount  of  General  Fund  Bonds  was  $576,250,000.  The 
amoimts  issued  annually  are  shown  in  Table  IV.  These  bonds 
have  not  been  sold  to  the  pubhc,  and  they  do  not  represent  an 
obhgation  of  the  city  in  the  accepted  sense  of  the  term.  In 
1926,  the  total  outstanding  indebtedness  redeemable  from  the 
rinkmg  fund  amounted  to  15  million  dollars.  The  fund  had 
investments  and  cash  assets  of  $20,000,000,  or  an  excess  of  33 
per  cent.  Yet  the  sinking  fund  had  an  additional  "security" 
in  General  Fund  Bonds  of  $576,250,000. 

These  G^eral  Fund  Bonds  bear  interest  which  is  paid  from 
the  General  Fund  into  the  Sinking  Fund.^  Since  the  Sinking 
Fund  is  overflowing,  the  interest  money  flows  back  at  once  into 
the  General  Fund,  and  requires  the  issue  of  an  equal  amount  of 
more  General  Fund  Bonds  —  surplus,  bonds,  interest  —  more 
surplus,  more  bonds,  more  interest.  .  .  .  But  the  motion  is 
not  perpetual.  These  paper  transactions  will  come  to  an  end 
in  1933,  when  the  bonds  supported  by  Sinking  Fund  No.  1  will 
be  retired.  The  city's  debts  will  be  more  fused  and  less  con- 
fused. 

1  This  scheme  was  embodied  in  an  amendment  of  the  Charter  secured  in  1903 
(Section  222).  Such  a  security  was  hardly  necessary,  because  the  accumulations  at 
the  time  were  already  almost  equal  to  the  amount  of  the  outstanding  debt. 

*  The  total  aeeimnilatioiis  of  interest  now  amount  to  $148,478,000.  This  inter- 
est is  aetually  paid  by  drawing  a  ivanant  upon  the  Chamberlain  as  in  the  case  of 
any  other  city  payment.  Later  new  warrants  are  drawn  to  pay  the  sim^us  back 
to  tbe  Gmial  Fmd  in  return  for  Genml  Fond  Bonds. 


Financial  Administration:  Debt  197 

TABLE  IV 


Gbhbbal  Fund  Bonds  Issued  in  I9(»-1926» 


Yb^Emsbd 
DaosMBm  31 

OmaauhWmwBcmm 

iHoed  Duiinc  tlM  Yew 

Otttirfaiidiiic  at  End  of  Ymt 

1903 

$8,500,000 

$8,500,000 

9,500,000 

18,000,000 

1905 

11,000,000 

29,000,000 

1906 

11,750,000 

40,750,000 

1907 

13,500,000 

54,250,000 

1908 

14,500,000 

68,750,000 

1QOQ 

16,750,000 

85,500,000 

1910 

17,000,000 

102,500,000 

1911 

17,500,000 

120,000,000 

1912 

17,500,000 

137,500,000 

1913 

22,000,000 

159,500,000 

1914 

23,500,000 

183,000,000 

1915 

23,000,000 

206,000,000 

1916 

23,500,000 

229,500,000 

1917 

25,000,000 

254,500,000 

1918 

27,000,000 

281,500,000 

1919 

28,500,000 

310,000,000 

1920 

32,500,000 

342,500,000 

1921 

34,000,000 

376,500,000 

1922 

37,500,000 

414,000,000 

1923 

38,500,000 

452,500,000 

1924 

39,500,000 

^000,000 

1925 

41,000,000 

533,000,000 

1926 

43,250,000 

576,250,000 

Serial  Bonds  versus  Sinking  Funds 

In  1915  the  Charter  was  amended^  to  permit  the  issue  of 
Serial  Bonds  as  an  alternative  to  the  regular  Corporate  Stock 
redeemable  by  sinking  fund  accumulations.  Each  issue  of  such 
bonds  is  divided  into  series,  which  are  retired  annually  in  d^mite 
and  equal  amounts.  Of  a  twenty-year  series  one-twentieth  is 
retired  each  year.  An  appropriation  is  included  in  each  year's 
budget  for  this  direct  retirem^t.  This  corresponds  to  the  annual 
appropriation  that  must  be  made  to  a  sinking  fund  to  care  for 

1  Compiled  from  the  Annual  Reports  of  the  Comptroller. 
«  Section  169,  amended  by  Laws  of  New  York,  1915,  c.  309. 


198  Nbw  Yobs  Crnr'a  Finangbb  ah© 

ihe  amortization  of  nonnserial  or  term  bonds.  To  this  extent  the 
two  systems  are  not  dissimilar.  A  portion  of  an  issue  of  Serial 
Bonds,  however,  is  retired  annually.  The  total  of  outstanding 
obligations  to  be  amortized  by  a  sinking  fund  remains  constant, 
Hioui^  the  net  debt  diminishes  as  the  sinking  fund  accumulates. 
Some  sinking  funds  are  invested  in  various  interest  bearing  securi- 
ties.i  New  York's  sinking  funds,  however,  are  all  invested  in  the 
city's  own  obligations.^  This  praclice  makes  New  York's  debt 
structure  at  once  simple  and  complicated.  As  their  assets 
accumulate,  the  sinking  fimds  purchase  the  city  securities. 
The  interest  on  these  securities  goes  to  the  sinking  funds.  The 
sinking  fimds  purchase  only  the  city's  hew  issues  and  do  not 
buy  in  the  open  market.  The  outstanding  obligations  payable 
from  the  city's  Sinking  Funds  on  January  1,  1927,  amounted  to 
$1,264,962,000.  Against  this  hability  the  City's  Sinking  Fund 
held  $287,795,000  in  miscellaneous  city  bonds.  Of  the  bonds 
hdd  by  the  Sinking  Fund  $157,039,980  were  payable  from  the 
Sinking  Funds  thmnselves.  Besides  their  investments  the  Sinking 
Funds  had  a  cash  balance  of  $6,013,249  plus  items  of  accrued 
interest  due  them  of  $2,886,317.  In  addition  to  the  bonds  of 
the  City  the  funds  held  $600,000  in  Liberty  Bonds.  The 
aggregate  assets  in  tiie  Sinking  Funds  was,  therefore,  of 
$299,194,706. 

Authorities  on  pubUc  finance  have  long  debated  the  com- 
parative merits  and  demerits  of  serial  bonds  and  sinking  funds.* 
Administrative  costs  of  sinking  funds  are  scnnewhat  greater,  and 
the  system  is  undeniably  more  complicated.  On  the  other  hand, 
there  is  one  great  compensating  advantage.  If  a  city  of  the  size 
of  New  York  uses  sinking  funds,  it  can,  in  times  of  stringency, 
assist  in  financing  itself.  New  York  City  pa3rs  itsdf ,  on  the 
S287,795,000  of  obligations  which  its  sinking  funds  hold,  $10,- 
000,000  annually  in  interest.  This  amount  —  plus  $10,000,00) 
which  goes  annually  into  the  sinking  fund  for  amortization  — 
beocmies  available  each  year  for  the  purchase  of  Corporate  Stock 

*  For  the  pimctioe  in  different  municipalities,  see  L.  D.  Upson,  The  Practice  of 
MwUeipal  Admmiairaiion,  pp.  107-125. 

*  Save  for  an  exoeptioiud  investment  of  $800,000  in  liberty  Boodk 
t  for  ref eiODoes,  see  Upstm,  op.  dL,  Qiapter  VL 


FiNANCiAii  Administsateon:  Dbbt  199 

or  bonds.  Even  in  most  stringent  times,  the  city  has  this  reserve 
for  pubUc  improvements. 

The  city  adheres  very  largely  to  the  poHcy  of  sinking  funds. 
Out  of  the  total  d^t  of  $950,000,000  incurred  betwe^  1915  and 
1926,  only  $218,000,000,  or  less  than  one-fourth,  represented 
serial  bond  issues  (See  Table  IX). 

The  Constitutional  Debt  Limit 

Before  it  was  consolidated  in  1898,  the  city  was  under  the 
necessity  of  applying  to  the  Legislature  for  authority  every  time 
it  wished  to  borrow.  The  new  Charter,  adopted  in  1898,  gave  to 
the  city  genaral  pow&m  to  borrow  for  any  municipal  purpose, 
subject  to  certain  limitations  imposed  by  the  Constitution.  These 
powers  have  been  continued  in  the  present  Charter  (1901).  Be- 
fore 1884  there  was  no  limitation  on  the  amount  of  indebtedness 
which  the  city  could  incur.  When  l^islative  authorization  was 
secured,  the  borrowing  pow^  of  tiie  city  was  limited  only  by 
its  abihty  to  market  its  bonds. 

Before  the  Tweed  regime,  the  city  borrowed  quite  conserva- 
tively. In  1870-71,  howevw,  the  indebtedness  rose  almost  to 
12^  per  cent,  of  the  assessed  valuation  of  real  estate.  Many  of 
the  bonds  then  issued  were  at  the  high  rate  of  6  per  cent,  and 
were  made  redeemable  from  taxation.  When,  in  the  early  eighties, 
it  became  necessary  to  repay  these  bonds,  the  ta9q)ayers  were 
severdy  burdened.  A  demand  arose  for  a  constitutional  check 
that  would  prevent  the  recurrence  of  such  a  situation.  In  1884, 
therefore,  the  Constitution  was  amended  to  prevent  the  repeti- 
tion of  such  abuses.  The  borrowing  capacity  of  the  city  was 
limited  to  10  per  cent,  of  the  assessed  valuations  of  taxable  real 
estate.  At  the  same  time,  the  tax  rate  which  the  city  could 
impose  on  real  and  personal  property  was  limited  to  2  per  cent,  of 
the  assessed  valuation.  Debt  charges  on  the  permanent  debt 
were  exempted  from  this  tax  rate  limit.^ 

Immediately  after  1884,  the  10  per  cent,  debt  limit  was  some- 
what embarrassing.   The  debt  was  being  reduced,  but  the  gross 

^The  text  of  thk  anwndmeiit  as  it  developed  b^weea  188i  and  1926  is  given  in 
the  Appendix,  p.  889. 


New  York  City's  Finances  and 


TABLE 


Gbnbral  Sottsces  and  Amount  of  Expansion  of  City's  Dbbt- 

Fieparod  by  the  Burara  of  AoeoontaiM^, 


Total 

Bonds 

Te.v  (10) 

rui.T  Amoumtb 

EmupTXD 

Per  Cbnt. 

Appbopbiatiom 

r  Rboemption 

EXPANUIIVO 

BT 

or  AannBD 

OF  Dbbt 

YSAB 

Cmr's 

Appbu^tb 

VALUAVMMf 

Dnv-lNcusuNo 

DmsioN, 

or 

OF  Dbbt 

FBOIf 

Other 

Pomm 

Scrann  Coxm 

Bbai.  Ectatb 

(ExcLuaivB  Off 

SOUBCBS 

(1) 

(2) 

(3) 

(4) 

(5) 

Fron 

1  Januaiy  1,  1910 

1910 

383.048.208.43 

A  $43,868,326.18 

$25,701,297.00 

$1,036,629.91 

$3,877,500.00 

1911 

99,882.290.47 

A  3.614,400.00 

81,464,749.00 

915.029.91 

179,600.00 

1912 

14,811,945.47 

305,872.00 

994.529.91 

108,500.00 

1913 

94.745.941.93 

B  69,943,063.65 

14,474,897.00 

761,051.51 

1914 

18,301,036.27 

4,321.205.00 

1,005.286.71 

117,300.00 

1915 

19,650,108.15 

5,890,087.00 

662.686.71 

402,600.00 
1,114,479.49 

1916 

27,876,874.55 

9,906,157.00 

2,728.647.50 

2,735,990.00 

1917 

23.064,876.56 

4,672,664.00 

4.358,450.00 

1918 

29,363,006.99 

A  iRt.536,9i».08 

8,509,385.00 

4,666.650.00 

251,500.00 
904,100.00 

1919 

29,529.089.56 

8,867,990.00 

5,051  150.00 

231,600.00 

1920 

40.960,764.39 

19,779,895.00 

5,091,650.00 

839,600.00 

1921 

155,985,384.65 

134,686,339.00 

4,876,150.00 

$64,100.00 

1922 

50,200,820.12 

27,700,673.00 

5,134.350.00 

624,224.08 

1923 

68,051,781.59 

34,607,373.00 

8,975,230.47 

1924 

82,257,195.06 

65,274,592.00 

9,616,652.84 

339,600.00 

1925 

106.673,120.92 

75,253,706.00 

15,065,557.79 

830,100.00 

1926 

145,768»646.35 

109,623.228.20 

18.430,900.00 

467,600.00 
341,334^ 

Ghrftnd 

Totah 

Sl.080.057.071.47 

$120,956,778.41 

$619,040,109.20 

$89,160,503.26 

$12,429,628.39 

(A)  R«pid  TnuMt  Bomb.         (B)  Doek  Bonds. 


indebtedness  exceeded  10  per  cent,  of  the  assessed  valuation. 
Ihe  question  therefore  arose  as  to  whether  the  indebtedness 
referred  to  by  the  constitutional  amendment  was  gross  or  net 
indebtedness.  Could  the  accumulations  of  the  sinking  funds  be 
deducted  from  the  gross  indebtedness  in  computing  the  difference 
between  the  amount  outstanding  and  the  amount  permitted  by 
the  ten  per  cent,  constitutional  hmitation  —  that  is,  the  annufd 
debt  incurmig  pow^  of  the  city?  The  question  was  submitted 
to  the  courts  which  ruled  that  the  sinking  fund  accumulations 
WW  deductible.^  »i'iuiio 

For  the  first  decade  after  the  adoption  of  the  am«idment,  the 

» See  BMik  for  SmviDgit  w.  Giaoe,  102  N.  Y.  313  (1900). 


Financial  Administration:  Debt 


201 


V 

IircuBBiNa  PowBB  DuBiNO  Each  Yeab  fbom  1910  to  1926 


Departmeiit  of  Finanoe 


SnrKZNO  Fund  Rbvsmuw 

Total  op 
Sinking  Fund 
RavxiruM  (9) 

Less 

RS8£RVES  (10) 
(6) 

Amortization 
of  Debt  (Budget 
Appropriations 

and  Rapid 
Transit  Rentals) 
(7) 

Revenue 
from  Investments; 
Interest  on  Bank 
Balances;  Surplus 
Water  Revenue 
(8) 

Totals 

(9) 

Reserve  for 
Amortisation 
of 

Enmpted  Dd[>t 
(10) 

Ybab 

to  Deoamber.  31 

1026 

$10,564,556.34 
13,714,611.56 
13,403,043.56 
9,449,639.90 
12,572,044.56 
12,082,854.95 
12,506,080.05 
13,782,262.56 
12,561,872.31 
15,378,349.56 
16,249,619.39 
16,058,775.63 
16,841,573.04 
14,109,578.12 
17,035,850.22 
15,786,257.13 
17,373,183.33 

$7,650,494.63 
8,290,672.83 
8,973,905.57 
9,238,149.90 
7,965,079.58 
7.913,871.79 
8,714,164.35 
9,215,386.71 
9,767,942.41 
9,740,516.14 
9,229,234.54 

10,276,907.41 
9,852,794.00 
7,661,305.71 
8,816,741.91 
8,819,776.50 
0,720.966.66 

$5,553,713.34 
7,070.550.97 
6,284, 167iJ7 
7,580,756.38 
7,901,906.66 
7,779,186.86 
7,646,067.76 
8,585,123.12 
8,502,060.36 
9,870,700.52 
10.317.364 J24 
10.149,781.83 
11.307,286.73 
11.777,621.43 
13.122.380.36 
12,349,046.79 
13,181.461.89 

$13,204,207.87 
16,361.223.80 
15.268.093.24 
16,818,905.28 
16,866.986.13 
15.693.058.65 
16,360,232.11 
17.800,509.83 
18.269.992.76 
19,611,216.66 
19.646.688.78 
20.426.680.24 
21.160,080.73 
19,438.827.14 
21.939.122.24 
21,161,823.29 
22.902.418.64 

$2,639,651.53 
1.646,612.24 
1365.040.68 
7.369.266.38 
3.294.941.67 
3.610.208.70 
3,854,152.06 
4,018,247.27 
5.708.120.45 
4,232,887.10 
4,296.969.39 
4367.913.61 
4,318,507.69 
6,329.249.02 
4,903372.02 
6,375,566.16 
5,629,23631 

1910 

1911 

1912 

1913 

1914 

1915 

1916 

1917 

1918 

1919 

1920 

1921 

1922 

1923 

1924 

1925 

1926 

$238,470,162.21 

$161,847,900.63 

$168,972,076.76 

$310,819,976.29 

$72,349,824.08 

dty  borrowed  oonservativdy.  Its  new  issues  correeponded  to 
the  amortization  and  redemption  of  the  outstanding  bonds.  The 

assessed  valuations  of  real  estate  were  soon  increased,  and  the 
ratio  of  indebtedness  therefore  declined.  In  1893,  demands  for 
improvan^ts  caused  the  city  to  borrow  on  a  relatively  larger 
scale,  but  the  indebtedness  still  remained  materially  bdow  the 
constitutional  limit.  Wh«i  consolidation  took  place,  however,  ih» 
ten  per  cent,  limitation  again  loomed  up. 

The  consolidated  city  took  over  the  debts  of  the  poUtical  units 
which  had  been  absorbed.  While  negotiations  for  consolidation 
were  in  progress,  many  of  the  smaller  places,  not  subject  to  a 
constitutional  debt  limit,  piled  up  obligations  whose  burden 


202 


New  York  City's  Finances  and 


Iff 


TABLE  VI 

l4BaAii  Dbbt-Incurmnq  Power  and  the  Non-exempt  Bonds 
Each  Year  from  1898  to  1926,  Inclusiyb* 

(In  thousands  of  dollars) 


(1) 
1898 


IMO 
1901 

1902 
1903 
1904 

1905 

1906 
1907 
1908 
1909 

1910 
1911 
1912 
1913 
1914 

1915 
1916 
1917 
1918 


1921 
1922 


1984 

1925 
1926 
1987 


Lkqai.  J>marr- 
Incunnro 
Pbwer  at 

Beginning 
of  Yew 


(2) 
S-20,131 

-14,469 

47,409> 
20,534 

7,551 
6,009 
103,646 

72,844 

45,953 
31,143 
27,695 
48,605 

58,764 
78,886 
125,684 
88,814 
51,373 

56,792 
54,326 
51,501 
50,270 
73,892 

70,478 
63,513 
175,266 
173,180 
148,323 

123,423 
101,747 
127,143 


Additionb  to  Dbbt-Incubring  Powbb  Dubinq  thx  Yxab 


10  Per  Cent,  of 

Increase  of 
Assessed  Valu- 
•tuui  oi  Real 


(3) 
$6,429 
40,501 

23,610 
6,923 

9,286 
142,088 
26,391 

20,611 
51,600 
50,199 
48,193 
8,476 

23,701 
81,464 
306 
14,474 
.  4,321 

5,890 
9,906 
4,672 
8,509 
8,867 

19,779 
134,686 
27,700 
34,607 
56,274 

75,254 
109,623 
154,226 


Redemption 
of  Non- 
exempt 

Bonds  urom 
Taxation 


(4) 
$4,020 
10,629 

4,389 
7,781 
4,973 
4,995 
11,810 


4,914 

1,094 
1,103 
878 
1,407 

1,677 
5,464 
4,619 
4,860 
5,282 

5,931 
5,240 
5,658 
9,315 
9,946 

15,533 
18,772 


Revenaes  ol 

Siiikii« 
Fnnililar 
Non-emnpi 
Bonds 


(5) 
$11,155 
12,681 

14,459 
14,941 
17,799 

10,371 
10,000 


10,504 

13,714 
13,403 
9,449 
12,572 

12,062 

12,506 
13,782 
12,561 
15,378 

15,249 
16,058 
16,841 
14,109 
17,085 

15,786 


Total 


(6) 
$21,606 
63^12 

42,459 
29,646 
32,060 

157,455 
48,203 


39,179 

96,281 
14,812 
24,801 
13,301 

19,649 
27,877 
23,074 
25,931 
29,528 

40,959 
155,284 
50,230 
58,032 
82,255 

106,573 


NOW-BXBMPT 

Bonds  Issued 


(7) 
$21,965 
27,137 

31,198 
24,920 
14,751 
27,356 
61,092 

31,220 
39328 
55,843 

48,687 
41,342 

39,303 
34,350 

47,521 
38,760 
59,239 

55,360 
50,745 
58,013 
2,327 
7,710 

6,324 
108,618 
28,264 
11,000 
110,372 

109,233 
85,218 


.  iSounw:  th* igm in  oolniim  2  are  taken  for  the  yem  1898>19M  fawk 

on  the  Debt  Ineurrina  Power  of  the  City,  October  1904;  and  for  the  later  jmn  from  the  annual  reports 
of  the  Comptroller;  thoae  in  column  3  are  computed  from  the  annual  reporto  of  the  Tax  Department 
of  like  dtjr;  thoae  in  oohunns  4  and  5  are  taken  for  the  years  1896-19M  from  the  1904  Report  of  the 
Comptroller  mentioned  above;  those  for  the  years  1910-1925  have  been  furnished  by  the  Burm  of 
Municipal  Accounts;  those  in  column  7  are  computed  as  indicated  in  Table  VIII,  see  p.  209. 

>The  latie  iiMsrease  ia  liw  dsbt-iaeiiRiac  power  ftha*  year  wm doe  lo  the  annmtions  that  year  hr 


'I 


Financial  Adiunisibatioii:  Debt 


could  be  shifted  to  the  greater  city.  Moreover,  the  Corporation 
Counsel  rendered  an  opinion  requiring  the  inclusion  of  ''contract 
and  land  liabilities"^  in  the  computation  of  the  indebtedness  to 
which  the  constitutional  limit  appUed.  Brfore  conadidation,  m€k 
a  legal  ruling  would  have  been  unimportant.  After  consolidation, 
any  addition  made  a  great  difference.^  The  resulting  aggregate 
inddi>tedne68  was  in  excess  of  the  constitutional  Umit.^  No 
further  borrowing,  therefore,  could  take  place,  and  it  was  feared 
that  loans  which  had  been  authorissed,  and  under  which  ezpo&di- 
tures  were  being  made,  were  illegal.  In  1899,  therefore,  the 
State  Constitution  was  amended  to  exempt  the  county  debt  of 
$29,000,000  from  the  debt  limit,  and  the  borrowing  powers  of 
the  city  were  released  to  this  esd^nt. 

Assessed  valuations  were  largely  increased  in  1899  and  1900. 
A  margin  for  the  further  exercise  of  the  borrowing  power  was 
thus  created.  In  1901  and  1902,  nevertheless,  the  borrowing 
powers  of  the  city  were  low.*  The  asaeesed  valuations  were  shaiply 
raised,  and  in  1904  there  was  a  substantial  margin.  Such  small 
measiues  of  relief  were  obviously  futile  where  the  city  desired  to 
borrow  for  the  expenses  of  great  improvements  Uke  the  WiUiams- 
burg,  Manhattan  and  Queensboro  Bridges,  the  subways,  and  water 
supply  projects.  Another  constitutional  amendment  was  there- 
fore adopted  (1906).  It  exempted  from  the  debt  Umit  all  water 

1  The  Ck)urt  of  Appeals  later  sustained  this  view.   See  l^svy  m.  McQdlan,  196 

N  Y  178  (1909) 
*  «  The  amount  of  these  liabiUtieB  in  1807  wm  $65,000,000. 
•  The  ntufttkm  was  xefioited  by  the  Comptidler  in  1888  as  folJowB: 

Territory  Consolidated 
Former  Citt  of      with  Fobmkb  Citt  of 
New  York  N«w  Yomc 

XI  *  u^^A^  ^oKf  .    .    .       $188,856,361  $91,447,311 

Net  bonded  debt  •  25  122  351  1,041.804 

Contract  habibty  •         gj  jgs  gia  182,339 

F^riSu    ::::::::  Vw/)ao 

$202,943,525  $93,563,288 
TtolH»B«rt.«f««««dTiAiiitloo«ll«il«^  178.718.679  67^389 
Exoe«  over  conBtitotkmal  Umit     ....       m^M*A  mfiWM 


Aggregate  exoew  of  New  York  City  on  Janu-  $BMM^ 

ary  1,  1898   •• 

«  Table  V  and  Chart  UL 


Nsw  YoBK  Onr's  Financss  and 


CHART  in 

New  York  City's  Bobbowinq  Maboin,  1900-1927 


/xo- 


bonds  issued  after  Deeemb^  31,  1903.  This  was  justifiied  on 
the  theory  that  wat^  revenues  would  be  secured  in  sufficient 
amount  to  care  for  interest  and  amortization  charges,  etc.,  —  that, 
in  other  words,  the  improvements  would  be  self-sustaining.  The 
city  was  thus  ^labled  to  borrow  to  the  extent  necessary  to  com- 
I^ete  the  water  fitystem  th^  und^  way,  and  to  use  for  other 
great  improvements  the  additional  borrowing  capacity  created 
by  the  withdrawal  of  water  bonds  from  the  debt  Hmit.  During 
the  next  twenty  years,  water  bonds  to  the  amount  of  more  than 
S270,000,000  were  issued  outside  the  debt  limit. 

Substantial  as  this  increase  was,  the  city  was  again  in  diffi- 
culties by  1908.  During  the  ten  years  which  followed  consolida- 
tion, $500,000,000  had  been  borrowed.  $72,000,000  had  be^ 
Bpmt  for  schools,  and  approximately  the  same  amoimt  for 
streets  and  sewers.  Water,  transit,  bridges,  and  docks  (including 
ferries)  had  required  $50,000,000  each,  or  a  total  of  $200,000,1 
$38,000,000  had  been  spent  for  public  buildings,  and  $29,000,000 
fcHT  local  improvements  financed  by  special  assessments.^  In 


lllli 


» Figures  given  by  the  one-time  Deputy  Comptroller  of  the  CSty,  JSdfftr  J.  Levey 
in  his  communication  to  the  Joint  Legislative  Committee  appoiBted  to 
the  finances  of  the  city  of  New  York.   (November,  1908) 


Financial  Administration:  Dbbt 


205 


SOTTBCn 

ABO 


CHART  IV 

Which  thh  Dbbt-Incubrino  Powbb  Has  Bbbn  Fed  qb  R«x>n- 
STBUCTBD  Annually 


AfO 


i20 


\ 


SO 


40 


ToM  of  s// Sources— ^  - 


^/0%  of  Increase 


:  /far  ex.  Boneh 
fromTbx*/?' 

Sinkirrg  Fund 
fyrAbfrexet 

PL  SonaHi 
^1  J   I  I 


f 


206 


Nsw  York  City's  Finances  and 


January^  1908,  the  borrowing  margiii  of  the  dty  was  estimated 
by  the  Ccmiptroller  at  less  than  $3,000,000.  Yet  there  were  out- 

standing  at  that  time  authorizations  for  the  issuance  of  additional 
stock  exceeding  $180,000,000  in  amount,  and  the  city  was  about 
to  let  large  contracts  on  the  strength  of  these  authorisations. 
The  courts  were  appealed  to.  A  taxpayer  sought  to  enjoin  the 
Board  of  Estimate  and  Apportionment  from  approving  a  contract 
for  the  construction  of  subways  on  the  ground  that  the  city's 
capacity  to  incur  further  indebtedness  was  insufficient  to  supply 
the  funds  necessary  to  complete  constnieti<m.  A  referee  was 
appointed  to  conduct  an  inquiry  into  the  amount  of  existing 
indebtedness,  subject  to  the  constitutional  debt  limit.^ 


TABLE  vn 

CjHkmm  Bonded  hmwrnrnDNwaa  as  of  Dmsmbbb  31,  1926»  CLAflsniXD  ab  Ezbmpt 
AND  NoN-smfFT  (EzGLiiBiya  OF  OtmpORAiB  Shock  Noras)^ 


CkA»AcnBi  or  lupin  1  in  HI 

Total 

General     Purposes  (Schools, 

Streets,  Public  BuUdings,  Etc.) 

$758,197,000 

$758,197,000 

250,596,000 

$51,014,000 

301,610,000 

Water  

7,247,000 

269,956,000 

277,203,000 

Docks  and  Ferries  .... 

82,712,000 

69,943,000 

152,655,000 

Ommty  

2,142,000 

2,142,000 

$1,008,752,000 

$m066,000 

$1,491307,000 

It  was  evident  that  even  the  most  Uberal  interpretation  of 
the  borrowing  margin  of  the  city  would  not  permit  the  large 
expenditures  necessary  for  subwajrs.  Belief,  tiierefore,  had  to 
be  sought  through  a  new  constitutional  amendment  (1909). 
Revenue  producing  improvements  for  New  York  City  which, 
after  deduction  of  all  repairs  and  maintenance,  netted  a  revenue 
in  excess  of  debt  charges,  were  excluded  from  the  debt  limit  so 
long  as  this  condition  obtained.  Subway  and  dock  bonds  were 
exempted  from  the  debt  limit  to  the  extent  that  they  were  self- 

>  See  New  York  City's  Debt,  a  brief  submitted  by  the  BuTOMi  of  Mimi^pfJ 
Research  before  Referee  B,  F.  Tracy,  in  Levy  vs.  McClellan. 

*  Compiled  from  Comptroller's  Statement  on  the  Debt  Jricurring  Power,  aa  cff 
Jtmmry  1, 19S7,  and  April  1, 1927 ,  pp.  9  and  12. 


FiNANGiAL  AmuNisiiBATioir:  Dbbt 


207 


CHART  y 

OmcANDiNG  Indebtedness  on  April  1,  1927,  Classified  as  Exempt  and 

Non-exempt 


soo 


TOO 


^400 

I 

'^300 


200' 


ZOO- 


Legend 
XZ^SHExempf 
miII3fibrf'exempf- 


ScfTOo/s,  3 f reefs,  ^afvr 


Docks 


TPSmff 


sustaining.^  At  the  time  there  was  no  question  but  tiiat  sueh 
improY^ents  were  sdfHgnistaining.  If  revenues,  after  deduction 
of  repair  and  maintenance  costs,  were  sufficient  to  pay  interest 
and  amortization  charges,  the  bonds,  on  petition  of  the  city,  could 
be  exempted  from  the  debt  limit  by  the  Appellate  DiviMon  of 
the  Supreme  Court.  In  the  course  of  the  next  few  years  (1910-18), 
an  additional  borrowing  capacity  of  $120,000,000  was  thus  created! 
Assessments  were  again  revised  upwards  in  1911,  and  the  city 
proceeded  with  its  transit,  water  supply,  and  other  improvement 
programmes.  The  relief,  however,  was  no  more  perman^t  than 
before.  The  subways  failed  to  be  self Hsupporting.  Out  of  a  total 
of  $300,000,000  of  transit  bonds,  the  Appellate  Division  exempted 
approximately  $50,000,000  from  the  debt  limit.  The  remainder 


See  Appendix,  p.  339. 


208 


Nbw  Yobk  City's  Finangss  and 


came  to  be  and  has  remained  a ''frozen  credit"  of  the  city.  New 
schools  now  became  a  pressing  need.   By  1914  there  was  much 

overcrowding.  Then  came  the  War. 

Calculation  of  the  Annual  Dsbt-Incubbing  Powbb 

Constitutional  amendments  and  charter  provisions  fix  the  d^t 

limit,  and  therefore  determine  the  extent  of  the  city's  annual 
debt  incurring  capacity.  What  amount  the  city  may  legally 
borrow  at  a  particular  time  is  aiithmetically  a  sunple  problem 
in  addition  and  subtraction.  It  is  a  problem,  nevertheleeSy  which 
presents  many  mysteries  to  the  layman.  The  determination  of 
the  amounts  to  be  subtracted  and  added  is  made  by  the  Comp- 
troller,  who  acts  in  accordance  with  complex  constitutional  and 
charter  provisions.  These,  however,  have  been  definitely  clari- 
fied by  the  courts  by  the  decision  rendered  by  them  in  the  case 
of  Levy  vs.  McClellan,  in  1909,  so  that  today  there  is  no  longer 
any  controversy  over  the  question  as  to  which  amounts  should 
be  included  in  the  computation  of  the  inddl^tedness  and  which 
should  not,  and  what  the  amount  of  the  debt  margin  really  is. 

The  computations  are  made  January  1  each  year,  and  again 
after  March  1,  when  the  new  tax  values  become  available.  The 
basis  of  the  calculation  is,  of  course,  ten  per  cent,  of  the  assessed 
valuation  of  taxable  real  estate  tas  exempt  real  estate  is 
excluded).  This  is  the  upper  limit  for  non-exempt  debt.  The 
gross  funded  debt  of  the  city  is  then  set  down,  and  from  it  certain 
deductions  are  made:  (1)  indebtedness  exempt  from  the  debt 
limit  (county  bonds,  water  bonds,  etc.);  (2)  the  sinking  fund 
holdings,  and  (3)  amortization  appropriations  in  the  budget.  To 
the  resulting  figure  must  be  added,  the  non-funded  contract  and 
land  liabilities  and  open  market  orders.  The  sum  is  the  total 
indebtedness  wUhin  the  dM  limit,  and  if  this  is  subtraeted  from 
the  total  debt-incurring  power  of  the  city  within  the  debt  Umit, 
(i.e.,  ten  per  cent,  of  the  assessed  valuation  of  taxable  real  estate) 
the  difference  is  the  constittdumal  debt-incurring  power  of  the  city 
within  the  debt  limit  as  of  a  particular  date.  The  Comptroller 
indicates  how  much  of  this  margin  is  reserved  or  unreserved.  The 
method  of  calculation  is  shown  in  Table  YIII. 


Financial  Administration:  Debt  209 
table  viii 

OAi^misfoir  09  Naw  Yobk  CJmr's  Constitutionaii  BoBBowma  IV>wsb  as  of 

Mabch,  1,  1927^ 

L   Total  Debt-Incurring  Power,  ten  per  cent,  of  the  wmfmd 

valuation  of  taxable  real  estate,  1926   $1,453  983  820 

IL   Gross  Funded  Debt,  March  1,  1927    2^,W^ 

EXMMST  FbOM  XteBT  LllfIT 

m.    ^unty  Bonds   $2,142,114 

IV.   Water  Bonds  and  Corporate  Stock  Notes   271,676,632 

V.   Rapid  lYandt  Bonds   51013  725 

VL   Dock  Bonds   69i943;053 

Total  Exmpt  Debt   $SH,77^SM 

Dbductioxs 

VII.    Sinking  Fund  holdings  for  non-exempt  debt   $883,176»537 

VIII.    1927  Budget  appropriation  for  amortization   nil* 

IX.  1927  Budget  appropriation  for  direct  redemption     .    .    .  13,728,250 

Total  deductions   $1,022,430,084 

Othkb  Telln  Funded  Debts  to  be  Added 

X.  UndliabiUty   $46,718,526 

XI.    Contract  Liability   in  gQg  ^33 

XIL  IieM  Gash  Available  therefor  \    \  MTS^TOS 

Total  Net  Additions  $156,950,911 

Xm.   total  indebtedness  within  debt  limit     .  $1,179,380,995 
Xnr.   OONSTTTUTIONAL  DEBT-INCURRING  power,  as 

of  March  1, 1927  $274,602,825 

The  debt  margiii,  of  course,  fluctuates  from  year  to  year.  An 
increase  in  assessed  valuations  increases  the  margin.  On  the 
other  hand,  the  inauguration  of  new  public  improvements  de- 
creases the  margin.  An  increase  is  effected  when  the  city  pays 
required  sums  to  the  sinking  fund  or  redeems  bonds  directly  from 
taxation.  If  such  bonds  which  are  redeemed  are  in  the  «inlring 
funds,  the  debt  margin  k  unaffected,  since  the  sinking  fund  hold- 
ings are  deductible. 

The  War  and  the  Introduction  of  the  "  Pay-as-you-go  " 

Policy 

The  outbreak  of  war  in  Europe,  the  temporary  closing  of  the 
Stock  Exchange,  and  generally  unsettled  banking  conditions 

^The  complete  statement  as  given  by  the  Comptroller  is  leproduoed  in  the 
Appendix,  see  p.  342. 

•By  March  1  these  amounting  to  $11,350,000  had  already  been  turned  over 
to  the  silildiig  funds. 


210  Nkw  York  drr's  Financss  and 


here  and  abroad  left  the  city  unable  to  borrow  for  temporary 
needs  or  for  permanent  improvements.  The  city's  bonds  had 
hitherto  been  sold  ext^ifflvdy  in  foreign  markets.  These  were 
now  dosed.  An  appeal  had  to  be  made  to  the  banking  insti- 
tutions of  the  city.  A  syndicate  was  formed  to  loan  the  city 
$100,000,000  for  three  years  at  6  per  cent.  In  granting  this  loan, 
the  Q3nidkate  stipulated  that  the  city  change  its  policies  of  financ- 
ing permanent  improvements.  The  dty  waa  required  to  cease 
borrowing  for  permanent  improvements  that  were  not  sdf- 
supporting.  This  change  of  pohcy  was  to  be  completed  within 
three  years.  In  1915,  one-fourth  of  the  cost  of  improvements  was 
to  be  financed  by  the  issue  of  Tax  Notes,  redeemable  in  the 
budget  of  the  succeeding  year;  the  remaining  three-fourths  were 
to  be  in  the  form  of  Serial  Bonds  redeemable  in  one  to  fifteen 
years.  In  1916,  the  cost  of  improvements  was  to  be  equally 
divided  betwe^  these  two  methods  of  financing.  In  1917,  Tax 
Notes  were  to  be  used  to  the  extoit  of  three-fourths.  Beginning 
with  1918,  all  costs  of  non-revenue  producing  improvements  were 
to  be  met  by  Tax  Notes.* 

Thus  the  "pay-aa-you-go"  policy  was  accepted  by  New  York 
City.  The  policy  was  imposed  by  the  syndicate  of  bankers.  The 
financial  stringency  of  the  first  months  of  the  War  furnished  the 
opportunity.  The  change,  however,  had  been  agitated  for  some 
time,  and  there  were  some  general  arguments  in  its  favor.  One 
schod  (rf  thought  in  pubUc  finance  has  maintained  that  pennanent 
improvements  should  be  financed  directly  from  taxation  and  that, 
long-term  borrowing  is  unwise  and  uneconomical.  This  school 
triumphed  when  the  ''pay-as-you-go''  policy  was  enacted  in  the 
City  Charter.  The  pdicy,  however,  was  never  carried  fully 
into  effect,  and  the  scheme  set  up  soon  began  to  be  ndiittled 
down. 

iThe  Board  of  Estimate  and  Apportionment,  by  a  resolution,  placed  itself 
on  record  as  accepting  this  policy,  and  in  1916,  the  State  Legislature  incorporated 
the  scheme  in  the  City  Charter  (Section  1G9),  Laws  of  1916,  c.  615.  Before  the 
plan  would  have  gone  into  full  effect,  it  wae  partially  set  aside  by  a  special  act  per- 
mitting the  issuance  of  fifteen  millions  of  Corporate  Stock  annually  until  one  year 
after  tbe  war,  subject  to  various  limitations  as  to  terms  (Laws  of  1918,  c.  668).  In 
1928  tlwre  was  a  temporary  suspension  to  the  extent  ol  ten  miDjoii  doOara  for  im* 
prowments  during  tluKt  year  (Laws  of  1988,  c.  754)^ 


Financial  Adiiini0!eration:  Debt 


211 


The  CoUapse  of  the  ''Pay-as-you-go''  Policy 

The  terms  imposed  by  the  banking  syndicate  were  too  drastic. 
A  complete  shift  within  three  years  irom  long-term  bonds  to 

Tax  Notes  would  have  imposed  too  heavy  a  burden  upon  the  tax- 
payers of  the  city.  Expenditures  for  permanent  improvements 
could  not  be  added  to  the  annual  budget  so  quickly.  The  change 
should  have  been  spread  over  a  longer  period.  The  city  practically 
suspended  further  improvements.  This  appears  from  TaUe  DL 
In  1915-16  new  authorizations  financed  by  Tax  Notes  amounted 
to  only  a  few  hundred  thousand  dollars.  The  maximum  between 
1917  and  1920  was  $4,500,000.  Bonds  of  classes  not  exnnpt 
from  the  constitutional  limitation  to  the  annual  amount  of 
$50,000,000  were  issued  in  1915,  1916  and  1917,  almost  entirely 
from  authorizations  made  prior  to  the  adoption  of  the  "pay-as- 
you-go"  policy.  The  total  annual  new  authorizations  for  such 
non-exempt  improvements  dropped  from  more  than  $50,000|000 
to  less  than  $5,000,000. 

The  result  was  that  in  1920  further  postponement  of  improve- 
ments could  no  longer  be  tolerated.  Crowding  in  the  schools  had 
become  extremely  serious,  and  there  was  a  widespread  d^nand 
for  the  construction  of  new  buildings.  The  city  therefore  appealed 
to  the  Legislature  for  a  relaxation  of  the  "pay-as-you-go'^  law, 
and  asked  that  bonds  for  school  construction  be  excepted  from 
the  Charter  provision.  The  request  was  granted.^  A  school 
construction  programme  was  proceeded  with  at  a  cost  in  the 
next  few  years  of  $170,000,000.  The  door,  having  been  unlocked, 
was  now  opened.  Six  miUions  for  the  erection  of  a  Municipal 
Building  in  Brooklyn  were  ex^pted,  and  there  followed  similar 
exemptions  for  the  American  Museum  of  Natural  History  (1921) ; 
the  Metropolitan  Musemn  of  Art  (1922);  a  central  hbrary  in 
Brooklyn;  the  Brooklyn  Museiun  of  Arts  and  Sciences  (1922); 
the  city-owned  hospitals;  and  ten  millions  for  street  improvements 

(1923)  ;  and  garbage  and  rubbish  disposal  plants  and  dumps 

(1924)  There  were  also  some  liberal  interpretations  of  the  phrase 

^LawBof  1920,  e.  960. 

•  Laws  of  1920,  c.  589;  Laws  of  1921,  e.  618;  Laws  of  1922,  e.  517;  Lawa  of  1923, 
e.  174;  Law*  of  1924,  c  135. 


212 


New  Yobk  City's  Finances  and 


Financial  Administration:  Debt 


213 


TABLE  IX 

AmruAL  Borrowings  and  Issues  of  Tax  Notes  on  Accoxjmt 

OF  Expenditures  for  Permanent  Improvements 

(In  thousands  of  dollars) 


CHART  VI 

Annual  Long-Tkbm  BoBBOwmos  and  Tax  Note  Issues 


YlUB^NPINQ 

Bonds  Issukd  Dubimo  thx  Ybab  (Exclubivx  of 
Gbmsbai.  Fund  Bonds,  Ravwraa  Bonds,  Spb- 
ciAL  Rxvxxm  Bonds,  and  OoBMMua  Stock 
Noras) 

Tax  Nom 
ImxJMD  Doting 

YUAM 

Total  Long- 
Term  Bonds 
AND  One  Ysab 

Tax  Notes 
Issued  During 
XHs  Ysab 

NoiMSBBnv^ 

Total 

(1) 

1898 
1899 

(2) 
$21,985 

27,137 

(3) 

■  •  •  ■ 
•  •  »  • 

(4) 
$21,985 

27,137 

(6) 

•  •  •  • 

•  •  •  • 

•  •  •  • 

•  •  •  • 

1900 

1901 
1902 
1903 
1904 

31498 

24,920 
14,751 
27,356 
61,092 

$  2,547 
13,451 
14,850 
15,666 
25,733 

33,745 

38,371 
29,601 
43,022 
86,825 

•  •  •  • 

•  •  •  « 
»  •  *  • 

•  •  •  • 

•  •  •  • 

•  •  •  • 

•  •  •  • 

•  •  •  • 

•  •  •  • 

•  •  •  • 

1905 
1906 
1907 
1908 
1909 

31,220 
39,828 
55,843 
48,687 
41,342 

9,990 

17,224 
23,257 
24,653 
31,224 

41,210 
57,052 
79,100 
73,340 
72,566 

•  •  •  • 
«  •  •  • 

•  •  •  • 

•  •  •  • 

•  •  •  • 

•  •  •  • 

•  •  •  • 

•  •  •  • 

•  •  •  • 

•  •  •  • 

1910 
1911 
1912 
1913 
1914 

39,303 
34,350 
47,521 
38,760 
59,239 

23,719 
27,939 
20,880 
24,213 
21,455 

63,022 
62,289 
68,401 
62,973 
80,604 

•  •  •  • 

•  •    •  a 

•  •   •  • 

•  •  •  • 

•  •   •  • 

•  •  •  • 

•  •  •  • 

•  •  •  • 

•  •  • 

•  •  •  • 

1915 
1916 
1917 
1918 
1919 

55,360 
50,745 
58,013 
2,327 
7,710 

15,300 
6,650 
6,000 

•  •  • 

•  •  «  • 

73,059 
67,395 
64,013 
2,327 
7,710 

$  361 
538 
4,600 
3,000 
2,060 

$73,420 
57,933 
68,613 
M27 
9,760 

1920 
1921 
1922 
1923 
1924 

6,324 
106,ei8 
28,264 
11,000 
110,372 

•  •  •  • 

2b,cido 

26^135 

6,324 
108,618 
48,264 

11,000 
136»507 

4,250 
5,000 
3,100 
3,700 
7,000 

10,574 
113,618 
51364 
14,700 
143,507 

1925 
1926 

109,233 
85,218 

23^870 

109,233 
109,068 

31,613 
16,500 

127,733 
125,588 

Nom:  The  fisureB  in  e<diiinii  3  are  taken  hem.  the  Ootnptn^er'a  SkiitmtM  m  Ae  DiM  Inewrrbno 

Power;  those  in  column  4  are  taken  for  the  years  189S-1910  from  Comptroller  Prendergaet's  The 
Butineaa  of  New  York  City,  How  the  City  GeU  Ita  Money  and  How  it  Spendt  It,  October  10.  1911.  p.  26; 
those  for  the  later  years  in  the  same  eoiumn  from  the  Annaal  Reporto  of  the  OonpCnller,  fOlO-liMlls 

those  in  column  5  from  the  Comptroller's  Statement  on  the  Debt  Incurring  , 
2  are  obtained  by  deducting  those  in  column  3  from  those  in  column  4. 


214  Nuw  York  City's  Finances  and 


''revenue-producing"  as  used  in  the  ''pay-as-you-go"  section  of 
the  Charter.  The  result  was  that  by  1924  little  remained  of  the 
"pay-as-you-go"  policy.  ChMi;  VI  shows  how  small  a  role  Tax 
Notes  have  played  in  the  financial  operations  of  the  city. 

Annual  Appbopbiationb  wob  Dsbt  Sebvicb 

The  aggregate  cost  of  maintainmg  the  city's  funded  debt  in 
1926  was  $91,554,789.  This  sum  was  ahnost  equal  to  the  $92,- 
570,479  expended  for  permanent  improvements  in  the  same  year 
from  the  proceeds  of  long-term  bonds. ^  The  annual  "aggregate 
cost"  of  the  city's  debt  is  met  by  appropriations  and  by  the 
special  revenues  that  the  sinking  funds  me^  have.  Water  rates 
go  into  the  Water  Sinking  Fund  and  subway  rentals  (in  part) 
into  the  Rapid  Transit  Sinking  Fund.  These  two  items  in  1926 
amovmted  to  $3,638,808  —  four  pes:  cent,  of  the  total  debt  service 
cost  of  $91,554,789. 

Debt  service  charges,  it  is  hardly  necessaiy  to  explain,  consist 
of  the  mterest  which  must  be  paid  to  the  holders  of  the  city's 
securities  and  the  amortization  charges  which  are  necessary  to 
provide  for  the  retir^ent  of  the  debt.  Amortization  paymmts 
are  a  noatter  of  actuarial  calculation  and  vary  with  the  terms  of 
the  bond  issues.  Thus  for  a  fifty-year  bond  issue  (supported  by 
a  sinking  fund  invested  in  4%  securities)  .56  per  cent,  of  the  total 
amount  of  the  issue  must  be  paid  annually;  if  the  term  is  twenty- 
five  years  2  per  cent,  must  be  provided.  Serial  bonds,  as  has 
be^  said  above,  are  durectly  redeemed.  The  amounts  necessary 
in  both  cases  for  interest  and  amortization  or  direct  redemption 
are  provided  in  the  Tax  Budget.^  The  fact  that  all  of  New  York 
City's  sinking  funds,  with  the  exception  of  a  small  block  of 
liberty  Bonds,  are  invested  in  the  city's  own  securities  is  some- 
limes  confusing.  It  should  not  be.  A  check  or  warrant  is  drawn 
on  the  interest  appropriation  in  the  Tax  Budget  accounts  to  pay 
the  amount  due  from  the  city  for  interest  on  Corporate  Stock  or 

»This  figure  is  obtained  by  deducting  from  the  total  of  $146,436,043  shown  in  the 
table  cm  p.  3  of  the  Comptroller' 9  Bepartfor  1926  the  $53,865,564  financed  from  Tax 
Notes  or  aaseBsment  funds.  Hie  table  is  leproduoed  above,  p.  212 

^8ee  below. 


Financial  Administration:  Debt 


215 


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216 


Nxw  YoBK  Cirr's  Financbs  and 


Serial  Bonds  hdd  by  the  sinkiiig  fund,  in  the  same  manner 

as  if  the  corporate  stock  or  serial  bonds  were  held  by  the 
public. 

The  city  budget  also  includes  under  the  heading  of  Debt 
Service  the  appropriations  necessary  for  the  interest  on  and 
redemption  of  temporary  borrowings.  As  has  been  pointed  out, 
this  is  merely  a  way  of  meeting  one  year's  expenses  in  the  next 
year's  budget.  The  added  interest  cost  is  $4,000,000.1  Table 
X  shows  the  nature  of  the  debt  service  costs  and  ihmr  growth 
since  1910.  It  does  not  reveal  the  full  cost  of  the  city's  borrowings 
since,  as  has  been  explained,  the  sinking  funds  have  revenues 
from  sources  other  than  taication. 

Amobtization  and  DmECT  Redemption  of  Bonds 

What  has  been  said  disdoees  frequent  attempts  to  increase  the 

borrowing  capacity  of  the  city.  Increases  have  come  by  amend- 
ments exempting  certain  obUgations  from  the  constitutional  debt 
limit  of  ten  per  cent.  Increases  have  also  come  through  frequ^t 
revisions  in  assessed  valuations.*  There  is  also  available  a  third 
method  which,  while  it  does  not  make  possible  a  larger  outstanding 
debt  at  any  given  moment,  does  make  it  possible  to  borrow  a 
larger  aggregate  amount  in  a  given  period  of  time,  at  the  cost  of 
increasing  current  revenues  by  the  same  amount.  Moreover 
these  increased  current  revenues  may  be  obtained  by  increasing 
the  tax  rate  on  property  without  involving  danger  from  the  2  per 
cent,  tax  limit,  for  debt  service  falls  outside  this  limit.  This  third 
method  consists  of  shortening  the  term  of  new  bonds  issued  and/or 
of  rede^ning  before  maturity,  or  merely  through  the  accumula- 
tion of  larger  resources  in  the  sinking  funds.  As  was  pointed  out 
above,  when  payments  are  made  into  the  sinking  funds,  the  city's 
debt-incurring  capacity  correspondingly  increases. 

A  simple  illustration  may  make  thk  point  clears.  Suppose 
tiiat  the  city  issues  $1,000,000  in  4%,  fifty-year  bonds.  Amorti- 

1  See  Chapter  II,  p.  64. 

*  Assessed  valuations  in  the  counties  of  New  York  City  bear  a  higher  ratio  to 
true  values  than  in  any  other  part  of  the  state.  One  reason  is  that  the  higher  the 
valuations  the  higher  the  debt  limit. 


FmANCUL  Adionibtration:  Debt 


217 


zation  charges  would  amount  to  approximately  $6,550  per  annum.* 
Under  such  circumstances,  therefore,  the  borrowing  capacity  of 
the  city  would  increase  annually  in  proportion  to  these  amortiza- 
tion payments,  and  the  interest  which  they  accumulate.  If,  on 
the  other  hand,  the  bonds  had  been  issued  for  twenty-five  years, 
the  payments  would  be  $22,439,  or  four  times  greater.  The 
restoration  of  borrowing  power  is  thus  four  times  as  rapid.  It 
follows,  therefore,  that  the  shorter  the  term  of  the  bonds,  ihe 
greater  the  extent  to  which  the  city  can  expand  its  borrowing 
capacity,  subject  to  its  ability  to  meet  the  larger  annual  amortiza- 
tion payments  which  short-term  bonds  require.  These  larger 
annual  payments  mean  laiger  annual  increases  in  borrowing 
capacity,  at  a  cost,  however,  of  increases  in  current  revenues  of 
the  same  amounts.  It  should  be  noted  also  that  bonds  for  25 
years  could  be  issued,  retired  and  reissued  during  the  fifty-year 
period.    Chart  VII  shows  this  graphically. 

During  the  last  twenty-five  years  the  debt  has  been  increased 
from  $341,000,000  to  $1,600,000,000,  but  the  annual  revenues 
of  the  sinking  funds  have  remained  practically  constant.  In 
1898,  for  example,  they  were  $11,000,000.  In  1925  they  were 
$15,000,000.  In  some  of  the  intervoiing  years  they  fdl  as  low 
as  nine  or  ten  million,  and  in  no  case  have  they  exceeded  $17,000,- 
000.  The  explanation  for  this  is  to  be  found  both  in  the  terms  of 
the  bonds  which  the  city  issued  during  this  period,  and  in  the 
altered  method  of  managing  the  sinking  funds.  Prior  to  consoli- 
dation the  terms  of  bond  issues  were  invariably  short,  and  rarely 
exceeded  thirty  years.  Only  a  few  park  issues  and  some  of  the 
Tweed  obligations  ran  for  forty  years.  As  a  matter  of  fact,  bonds 
during  this  period  were  virtually  retired  before  they  were  actually 
due.  As  has  been  explained,  the  sinking  funds  of  this  period  were 
fed  from  miscellaneous  revenues  which  accumulated  faster  than 
the  terms  of  the  bonds  required  so  that  the  bonds  were  retired 
within  twenty  or  twenty-five  years. 

The  Charter  of  1808  pmnitted  the  issue  of  bonds  for  fifty- 

*  This  figure  and  all  those  used  in  connection  with  Chart  VII  were  calculated 
from  actuarial  tables  gLvm  in  U.  S.  D^Murtmeiit  of  Agriculture  Bulletin  136,  Hi^ 
way  Bonds. 


218  New  York  City's  Finances  and 

CHART  vn 

CoMPABATivB  Amobuzation  OF  A  25- AND  A  50-Yeab  Bond  Issub 


I. 

I 

Mm  4 

)  1 

• 

L  J 

lb  liqiiidate  the  prindpal  of  $1,000^000  at  a  maturity  of  25  yean  would  require 
annual  pa3rment8  to  the  sinkmg  fund  of  $24,012  invested  in  4%  bonds;  at  a 
maturity  of  50  years  annual  payments  of  $6,550  simflarly  invested  would  be  required. 
The  Chart  indicates  that  though  the  25-year  plan  requires  payments  four  times  as 
large,  the  amount  in  the  sinking  fund  at  any  time  prior  to  maturity  is  four  times 
greater.  This  is  the  amount  that  would  be  restored  to  the  city's  debt-incurring 
e^Muaty.  Tliere  is  also  a  great  saving  in  interest  Hie  gross  interest  payments 
<m  a  $1,000,000  issue  at  4%  during  50  years  would  amount  to  $2,000,000;  during 
25  years  to  only  $1,000,000.  The  gross  sinking  fund  charges  amount  to  $327,500 
under  the  50-year  plan  and  $600,300  under  the  25-year  plan.  This  means  a  net 
advantage  of  $727,200  (aknost  75%  of  the  issue)  in  favor  of  the  25-year  maturity. 

year  tams.  The  dty  at  onoe  took  advantage  of  this  and  length- 
ened its  future  bond  issues,  first  to  forty,  and  since  1903,  to 
fifty  years.  This  is  clearly  seen  in  Table  XII.  It  will  be  noticed 
that  the  issues  still  outstanding,  which  antedate  consolidation^ 
are  mainly  thirty-year  bonds.  The  bonds  from  1900  to  1902 
are  largely  forty-year  bonds.  Since  1903,  fifty-year  bonds 
predominate. 

As  a  result,  at  the  close  of  the  year  1926,  more  than  85  per 
cent,  of  the  outstanding  Corporate  Stock,  or  73  per  cent,  of  the 
city's  entire  funded  indebtedness,  consisted  of  fifty-year  bonds. 
This  is  shown  in  Chart  VIII.  It  will  be  noted  that  tiie  terms  of 
the  bonds  were  being  lengthened  to  fifty  years  at  the  vecy  time 
that  the  Charter  was  being  amended  to  permit  the  transfer  of 


Financial  Administkatign:  Debt 


219 


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Nxw  YoBX  Crnr'a  Financbs  and 


CHART  Vm 

Outstanding  Indsbtbdniuss  on  April  1,  1927,  Classified  Accobding  to  thb 

Term  of  the  Bonds 

ffOO  I  


Term  cf  Yesrs 

surpluses  from  Sinking  Fund  No.  1  to  the  General  Fund.^  The 
rapid  increase  of  sinking  fund  aoeumulatioxis  was  producing 
substantial  additions  to  the  ddbt  margin  of  the  city.  In  1903, 
however,  when  these  surpluses  were  released  and  the  terms  of 
the  bonds  were  lengthened,  the  amortization  payments  were 
reduced.  Since  that  time,  tJie  margin  between  gross  debt  and 
net  debt  has  noticeably  nanowed.  Today  a  debt  eight  times  the 
debt  at  consolidation  is  supported  by  sinking  fund  accumulations 
less  than  twice  as  large.' 

The  first  result  of  these  changes  of  policy  was  to  keep  the  tax 
rate  from  increasing.  If  the  city  is  content  to  increase  its  debt 
service  appropriations  by  the  amount  necessary  to  feed  the  sinking 
funds,  the  device  of  shortening  the  terms  of  the  bonds  would 
solve  the  problem  of  the  debt  limit.  By  issuing  fifty-year  bonds, 
tiie  dty  has  frozen  its  credit  so  that  its  programme  of  permanent 

» See  above,  p.  217.        «  Table  V. 


Financial  Administration:  Debt 


221 


improvements  is  seriously  menaced.  The  city,  for  example,  finds 
itself  unable  to  ei^d  $30,000,000  for  the  Tri-borough  Bridge.' 

Shorter  terms  for  city  bonds  would  make  the  borrowed  moneys 
revolve  more  quickly.  The  same  amount  of  constitutional  debt 
incurring  capacity  would  therefore  permit  the  city  to  perform 
double  the  amount  of  work.  The  ultimate  effect  might  be  a 
reduction  of  the  debt  substantially  below  the  debt  limit,  for  the 
taxpayer  would  find  amortization  charges  a  greater  burden.  A 
margin  in  the  city's  borrowing  power  would  give  it  greater 
leeway  in  the  devdopment  of  minor  items  in  its  programme  of 
improvements. 

*  The  Board  of  Estimate  has  recently  decided  (See  Proceedings  of  the  Board  of 
Estimate,  May  25,  1927)  to  attempt  to  work  out  the  financing  of  the  Tri-borough 
Bridge  without  using  pubUc  credit  through  the  creation  of  a  Bridge  Authority.  Such 
an  Authority  would  have  power  similar  to  that  of  the  Port  Authority  to  issue  bonds 
to  be  paid  from  the  tolls  of  the  bridges.  Inasmuch  as  most  of  the  city's  available 
credit  is  bong  earmarked  for  its  subway  programme,  it  is  difficult  to  see  how  bridges 
or  tunnels  or  other  major  improvements  can  be  financed  without  some  such  device. 
Such  a  solution,  however,  will  not  affect  the  general  situation  which  is  here  described. 


CHAPTER  VIII 


Subway  Financb 

The  largest  single  item  of  the  existing  indebtedness  of  New 
York  City  is  its  subway  debt,  which  amounted  on  May  1,  1927, 
to  $351,000,000  or  a  little  over  21  per  cent,  of  the  city's  gross 
outstanding  funded  debt.  In  view  of  the  present  importance  of 
the  problem  of  new  subway  construction  and  of  the  fact  that 
work  has  abeady  beeen  progressing  for  a  number  of  years  on  a 
building  programme  caUing  for  an  ulthnate  additional  outlay 
by  the  city  of  $674,536,000/  no  study  of  the  city's  financial 
position  would  be  complete  without  a  survey  of  the  present 
status  of  the  subway  debt  and  of  the  drcumstaaees  attending  its 

I.  Existing  Subway  Indebtedness 

The  city  has  a  direct  investment  in  the  existing  subways 
amounting,  as  of  June  30,  1926,  to  $344,400,000^  as  compared 
with  investments  qf  $166,824,000  by  the  Interborough  Rapid 
Transit  Company,  and  $49,232,000  by  the  New  York  Rapid 
Tranmt  Ck>rporation.*  The  latter  figures  do  not  include  the 
investments  of  these  companies  other  than  on  accoxmt  of  subway 
lines. 

The  sums  invested  by  the  city  in  subways  are  represented  by 
issues  of  corporate  stock,  the  earliest  of  which  was  made  in  1900 
OthCT  issues  from  time  to  time  have  brought  the  total  amount 
of  corporate  stock  outstanding  on  account  of  subways  to  $351,- 
000,000  by  May  1,  1927.  The  growth  of  this  debt  by  annual 
increments  is  shown  on  Table  No.  1  and  Chart  No.  1. 

»Board  of  Transportation,  Communication  to  Board  of  Estimate,  July  12,  1927 
p.  21.  ' 

^Summaiy  of  Annual  Beport  of  Transit  Gomminioii  for  1926  p  31 
•Ibid^  p.  32. 

222 


Financial  AninNis'TBATioN:  Subway  Finance  223 

TABLE  I 

ScTBWAT  Bonds  Outstandino  March  1,  1927 


Redeemable  from  the  Snking  Fund  of  tlie  City  of  New  York 


Ybab  ov 

Year  of 

Amount  or 

Annual 

Annual 

laaua 

R*.TE 

Matubity 

ISSUB 

Intehest 

Amortization 

190G   

4 

1936 

$  500,000 

$  20,000 

$10,509.63 

1901  

3^ 

1948 

4,000,000 

140,000 

48,766.69 

3H 

1949 

1,000,000 

35,000 

11,698.11 

1949 

3,000,000 

105,000 

oO,094.3o 

1901  

3 

1950 

1,500,000 

45,000 

16,844.77 

1901  

1950 

2,500,000 

87,500 

28,074.62 

1902  

1951 

8,500,000 

297,500 

91,673.99 

1903  

1952 

1,166,000 

37,895 

12,082.72 

1902  

1952 

4,000,000 

140,000 

41,450.15 

S'A 

1952 

6,000,000 

210,000 

62,175.23 

3H 

1953 

2,000,000 

70,000 

19,921.01 

1904  

3H 

1953 

3,000,000 

105,000 

29,881.52 

3H 

1954 

4,700,000 

164,500 

45,015.54 

1904  

33^ 

1954 

2,250,000 

78,750 

21,547.98 

1954 

2,500,000 

87,500 

23,946.44 

31^ 

1955 

250,000 

8,750 

2,308.28 

.  .4 

1956 

36,000 

1,440 

331.67 

1907  

4 

1957 

1,500,000 

60,000 

13,298.24 

1957 

2,000,000 

90,000 

17,730.98 

1908  

4 

1957 

204,825 

8,193 

1,887.08 

4H 

1957 

2,500,000 

112,500 

23,032.85 

4 

1958 

632,500 

25,300 

5,988.54 

4 

1958 

750,000 

30,000 

6,909.85 

1908  

4 

1958 

760,000 

30,000 

6,649.12 

1909  

4 

1950 

3,200,000 

128,000 

28,369.60 

S58.439^ 

12,117,828 

$605,188.94 

Redeemable  from  the  Rapid  Transit  Sinking  Fund 


1910  

4 

1959 

$  188,500 

$    7,540  \ 

$  1.967.15 

4 

1959 

24,512 

980/ 

1911  

4 

1960 

10,000 

400 

92.13 

1910  

4M 

4,1^ 

1960 

6,000,000 

255,000 

53,192.97 

1960 

8,500,000 

361,250 

78,311.68 

1912  

4M 

1962 

20.000.000 

850.000 

177,309.89 

1913  

4 

1963 

973,079 

38,923 

8,626.83 

4 

1963 

1,172,472 

46,898 

10,702.15 

1914  

4H 

1964 

10,000,000 

425,000 

88.654.95 

1915  

1965 

30,000,000 

1,350,000 

265.964.84 

4M 

1966 

27,130,000 

1,153,025 

240,520.87 

1917  

W2 

1967 

37,000,000 

1,665,000 

328,023.30 

1917  

4 

1967 

13,000 

520 

115.25 

4 

1969 

500,000 

20,000 

4,432.74 

1919  

4H 

1969 

1,000,000 

45,000 

8.865.49 

1920  

1969 

2,659,000 

119,655 

24,497.74 

4H 

1971 

55,000,000 

2,337,500 

487,602.23 

1924  

AH 

1974 

15,000,000 

637,500 

132,982.42 

1926  

4H 

1976 

28,000,000 

1,190,000 

248.233.84 

1927  

1977 

50,000.000 

2,125,000 

443,274.72 

$293,170,563 

$12,629,191 

$2,603,371.19 

Grand  Total  

$351,609,888 

$14,747,019 

$3,208,560.13 

224  New  Yobk  City's  Finances  and 

CHART  I 

AoouMULATioii  OF  Tranbr  ImmmoM  tW^W7 


With  the  exception  of  a  small  item  of  $500,000  due  in  1936,  all  of 
these  issues  of  corporate  stock  have  maturities  of  forty-nine  or  fifty 
years  from  the  dates  of  issua  The  interest  rate  varies  from  3^  per 
Gent,  and  per  cent,  on  some  of  the  earii^  issues  to  4^  par 
cent,  and  4}/^  per  cent,  on  some  of  the  more  recent  ones.  The  total 
annual  interest  and  sinking  fund  charges  on  this  stock  payable  by 
the  city  in  the  year  1927  amounts  to  $17,955,579.  Of  this  annual 
charge,  slightly  over  $2,500,000  is  chargeable  to  the  cost  of  the 
so-called  original  subways,  which  were  constructed  by  the  city 
between  1900  and  1908,  and  were  in  operation  prior  to  1913. 
This  annual  charge  is  carried  by  the  Interborough  Rapid  Transit 
Company,  under  the  terms  <rf  the  so-called  Dual  Contracts  of 
1913,  thus  pladng  no  burden  on  the  taxpayers.  The  balance, 
however,  is  a  charge  on  the  annual  budget,  and  must  be  met  out 
of  general  taxation.  Thus  the  taxpayers  are  at  present  mRlrmg 
an  annual  contribution  of  more  than  $15,000,000  on  account  of 
interest  and  amortization  of  subway  construction  costs  which 
must  be  raised  out  of  the  city's  taxable  sources  of  revenue. 


Financial  Administration:  Subway  Finance  225 

A  certain  portion  of  the  $351,000,000  of  outstanding  rapid 
transit  stock  has  been  issued  on  accoimt  of  the  new  subway 
system  now  under  construction.  It  would  be  difficult,  however, 
and  not  very  helpful  at  this  point  to  disentani^e  the  first  expendi- 
tures for  the  new  system  from  the  expenditures  which  are  still 
being  made  for  the  completion  of  the  existing  system.  In  view 
of  the  fact  that  the  city's  contribution  to  the  existing  system 
has  been  estimated  by  the  Transit  Commission  at  $344,300,000, 
as  above  stated,  and  in  view  of  the  fact  that  the  entire  amount 
of  transit  debt  outstanding  is  only  $351,000,000,  it  is  probably 
safe  to  say  that  almost  the  whole  of  the  present  transit  indebted- 
ness can  be  attributed  to  the  existing  subway  ^^tem,  and  that 
the  present  annual  burden  on  the  taxpayers  as  above  estimated 
represents  the  interest  and  sinking  fund  charges  on  the  money 
invested  by  the  city  in  the  construction  of  subways  under  the 
so-called  Dual  Contracts  of  1913. 

The  burden  on  the  taxpayers  und^  the  Dual  Contracts  is  due 
to  the  fact  that  under  their  terms  payment  of  interest  on  the 
city's  investment  is  postponed  to  certain  preferred  charges  and 
payments  to  the  companies,  which  the  annual  operating  income 
from  the  subways  available  for  making  such  payments  has  not 
been  sufficient  to  cover,  thus  leaving  no  surplus  for  payment  to 
the  city  of  its  interest  and  sinking  fund  charges.  If  the  present 
situation  continues,  and  the  city  fails  to  receive  any  of  the 
revenue  from  subway  operation  under  the  Dual  Contracts,  the 
annual  amount  which  will  have  to  be  paid  out  of  general  taxation 
for  interest  and  sinking  fund  charges  on  account  of  existing 
subway  indebtedness  will  be  as  shown  in  the  accompanying  table 
(Table  II)  for  each  year  until  the  final  extinction  of  the  debt. 

From  tiie  annual  sums  r^res^ted  on  tiie  following  table  and 
graph,  there  should  be  deducted,  in  order  to  determine  the 
amount  to  be  raised  by  taxation,  the  rental  of  approximately 
$2,500,000  received  by  the  city  from  the  Interborough  Rapid 
Transit  Company  for  its  lease  of  the  original  subway.  Against 
this  deduction,  however,  there  must  be  offset  additional  interest 
pajnnents  which  can  be  expected  to  accrue  in  the  future  owing 
to  the  fact  that  the  city  has  not  yet  completed  its  obligations 


226 


Nsw  YoBX  Cftt's  Financbs  and 

TABLE  n 

Transit  Debt  Sebvick  of  New  Yobk  Cmr  1927-197^ 
Qd  the  Basis  of  Indebtednen  Ineumd  to  March  l8t»  1987 


YUAM 


1927. 

1928. 

1929. 

1990. 

1931. 

1932. 

1933. 

1934. 

1935. 

1936. 

1937. 

1938. 

1939. 

1940. 

1941. 

1942. 

1943. 

1944. 

1945. 

1946. 

1947. 

1948. 

1949. 

1950. 

1951. 

1952. 

1953. 

1954. 

1955. 

1956. 

1957. 

1958. 

1959. 

1960. 

1961. 

1962. 

1963. 

1964. 

1965. 

1966. 

1967. 

1968. 

1960. 

1970. 

1971. 

1972. 

1973. 

1974. 

1975. 

1976.. 

1W7. 


Gboss  Tbanbit 
Dkbt 


$351,609,890 
351,609,890 
351,609,890 
351,609,890 
351,609,890 
351,609,890 
351,609,890 
351,609,890 
351,609,890 
351,609,890 
351,109,890 
351,109,890 
351,109,890 
351,109,890 
351,109,890 
351,109,890 
351,109,890 
351,109,890 
351,109,890 
351,109,890 
351,109,890 
351,109,890 
347,109,890 
343,109,890 
339,109,890 
330,609,890 
319,443,890 
314,443,890 
304,993,890 
304,743,890 
304,707,890 
298,503,065 
296,370,565 
292,957,553 
278,447,553 
278,447,553 
258,447,553 
256,302,000 
246,302,000 
216,302,000 
189,172,000 
152,159,000 
152,159,000 
148,000,000 
148,000,000 
93,000,000 
93,000,000 
93,000,000 
78,000,000 
78,000,000 
50,000,000 


14,747,019 
14,747,019 
14,747,019 
14,747,019 
14,747,019 
14,747,019 
14,747,019 
14,747,019 
14,747,019 
14,747,019 
14,727,019 
14,727,019 
14,727,019 
14,727,019 
14,727,019 
14,727,019 
14,727,019 
14,727,019 
14,727,019 
14,727,019 
14,727,019 
14,727,019 
14,587,019 
14,447,019 
14,314,519 
14,017,019 
13,629,124 
13,454,124 
13,123,374 
13,114,624 
13,113,184 
12,842,491 
12,757,191 
12,620,671 
12,004,021 
12,004,021 
11,154,021 
11,068,200 
10,643,200 
9,293,200 
8,140,175 
6,474,655 
6,474,665 
6,290,000 
6,290,000 
3,952,500 
3,952,500 
3,952,500 
3,315,000 
3,315,000 
2,125,000 


3,209,159.13 
3,209,159.13 
3,209,159.13 
3,209,159.13 
3,209,159.13 
3,209,159.13 
3,209,159.13 
3,209,159.13 
3,209,159.13 
3,209,159.13 
3,198,649^ 
3,198,649.50 
3,198,649.50 
3,198,649.50 
3.198,649.50 
3,198,649.50 
3,198,649.60 
3,198,649.50 
3,198,649.50 
3,198,649.50 
3,198,649.50 
3,198,649.50 
3,149,882.81 
3,103,090.37 
3,058,170.98 
2,966,496.99 
2,850,788.89 
2,800,986.36 
2,710,476.40 
2,707,168.12 
2,707,836.45 
2,651,287.30 
2,631,739.79 
2,601,403.04 
2,469,806.26 
2,469,806.26 
2,292,496.37 
2,273,167.39 
2,184,512.44 
1,918,547.60 
1,678,026.73 
1,349,888.18 
1,349,888.18 
1,312,002.21 
1,312,092.21 
824,490.98 
824,490.98 
824,490.98 
691,508.56 
601,506.56 
443^4.72 


1 


Financial  Administration:  Subway  Finance  227 

CHART  n 

FoTUBB  Dbbt  Sbkvicb  Requisbd  por  ExnxnrG  (192  )  Dbbtv 


uader  the  Dual  Contracts.  Some  construction  work  remains  to 
be  done,  and  in  addition  there  are  pending  certidn  claims  against 

the  city  by  the  operating  companies  for  damages  due  to  alleged 
breaches  of  contract  by  the  city.  One  of  these  claims,  which  is  the 
subject  of  pending  litigation,  amounts  to  $30,000,000.  It  is  thus 
impossible  at  the  present  time  to  estimate  accurately  the  addi- 
tional sums  which  the  city  will  have  to  invest  in  the  existing 
subway  system  to  complete  its  contract  obligations.  These 
further  investments  may  well  increase  the  annual  pa,ymmtB 
shown  on  ihe  foregoing  table  by  two  million  dollars  annually. 

Whether  or  not  these  sums  will  continue  to  be  a  charge  on  the 
city's  revenue  from  taxation  can  only  be  considered  in  the  light 
of  the  terms  of  the  so-called  Dual  Contracts  and  a  knowledge  of 
their  financial  results  to  date. 

II.  The  Dual  Contracts 
The  existing  subways  are  operated  under  two  contracts,  one 
between  the  city  and  the  Interborough  Rapid  Transit  Company, 
the  other  between  the  city  and  the  New  York  Municipal  Railway 

Corporation,  the  predecessor  in  interest  of  the  New  York  Rapid 
Transit  Corporation.  The  two  latter  corporations  are  operating 

subeidiiuries  of  tbefonner  Brooklyn  Rapid  Transit  ConqMtfiy  and 


Nbw  Yobk  em's  Financxs  and 


its  preset  successor,  the  Tpooldyn-Manhattan  Transit  Com- 
pany, respectively.  Both  contracts  were  signed  March  J  9,  1913, 
as  part  of  a  single  programme,  and  hence  are  commonly  referred 
to  as  the  Dual  Contracts.  Neither  the  city  nor  the  oompames  have 
been  satisfied  with  the  operation  of  these  contracts,  and  there 
have  been  irritation,  recrimination,  and  unsuccessful  negotiations 
lasting  over  a  period  of  more  than  ten  years. 

History 

The  Dual  Contracts  grew  out  of  a  situation  quite  similar  to 
that  which  will  exist  when  the  new  subways  now  under  con- 
struction are  completed.  Between  1907  and  1912  the  city  had 
at  great  expense  built  c&ctsm  lines  and  was  engaged  in  building 
others,  for  the  operation  of  which  no  arrangements  had  been  made, 
and  which  it  became  imperative  to  place  in  service  as  soon  as 
possible.  The  Dual  Contracts  were  the  result.  In  order  to  under- 
stand their  terms  it  is  demrable  to  review  briefly  the  earlier  history 
of  subway  construction  and  operation  in  New  York. 

The  so-called  "original  subways,"  consisting  of  the  present 
West  Side  line  above  42d  Street,  including  the  Lenox  Avenue 
branch,  the  42d  Street  shuttle  from  Times  Square  to  Grand 
Central  Station,  and  the  present  East  Side  line  below  42d  Street, 
including  the  Ime  from  the  City  Hall  under  the  East  River  into 
Brooklyn  as  far  as  Atlantic  and  Flatbush  Avenues,  were  con- 
structed under  two  contracts  made  in  1900  and  1902  with  the 
predecessor  in  interest  of  the  present  Interboroui^  Rapid  Transit 
Company,  and  known  as  Contracts  Nos.  1,  and  2,  respectively. 
The  main  portion  of  the  Manhattan  line  was  completed  and  put  in 
operation  in  the  autumn  of  1904.  The  Brooklyn  line  was  opened 
to  South  Ferry  in  1905,  but  because  of  difficulties  in  tunnellmg 
mkdet  the  East  River  did  not  reach  Borough  Hall,  Brooklyn 
until  January,  1908.  ' 

The  theory  of  the  contracts  under  which  these  lines  were  built 
was  adopted  when  it  had  been  found  impossible,  after  a  number 
of  years  of  effort,  to  induce  private  ci^ital  to  construct  the  Hues 
in  return  for  an  ordinary  franchise.  The  contracts  accordingly 
provided  that  the  city  should  pay  the  cost  of  construction,  and  in 


Financial  Adionistbation:  Sttbwat  Finangb  229 

return  should  have  title  to  the  completed  subways.  The  operating 
company  was  to  supply  the  equipment  in  return  for  a  long-term 
lease  —  fifty  years  in  the  case  of  the  Manhattan  line,  thirty-five 
years  in  the  case  of  the  Brooklyn  line,  with  the  privilege  of  re- 
newals in  both  cases  for  an  additional  period  of  twenty-five  years, 
and  without  any  right  of  recapture  by  the  city.  The  company  was 
to  pay  as  annual  rental  to  the  city  for  the  use  of  the  subways  a 
sum  sufficient  to  cover  the  intmst  and  sinkmg  fund  charges  on 
the  amount  borrowed  by  the  city  for  construction  costs,  retaining 
the  entire  net  operating  income  as  profits. 

Hardly  was  the  Manhattan  line  in  operation  before  the  need 
for  further  subwasrs  became  appar^t.  The  situation  was  very 
shnilar  to  that  of  the  past  few  years  —  an  existing  system  unable 
to  meet  the  city^s  traffic  demands  and  a  need  for  financing  a  new 
system  which  would  in  some  way  be  coordinated  and  cooperate 
with  the  old.  This  condition  continued  from  1906  to  1912. 

At  the  beginning  of  this  period,  because  of  the  large  profits 
shown  by  the  Interborough  in  its  first  years  of  operation,  and 
because  of  pubUc  disapproval  of  certain  aspects  of  its  financing 
policy,  there  arose  a  strong  demand  for  direct  municipal  operation 
of  any  new  subways  that  might  be  built.  Thexe  was  also  dis- 
satisfaction with  the  long  term  of  the  Interborough  leases  and  with 
the  absence  of  any  clause  permitting  recapture  of  the  properties 
by  the  city.  The  Rapid  Transit  Law  under  which  the  subways 
had  be^  built  and  leased  was  thmfore  altered  by  the  so-called 
Elsberg  Amendments,^  which  on  the  one  hand  made  it  possible 
for  the  city  to  engage  in  direct  municipal  operation  of  subways, 
and  on  the  other  hand  restricted  any  future  lease  of  the  subways 
for  operation  by  a  private  concern  to  an  initial  team  ci  twenty 
years  with  a  tw^ty-year  renewal  period. 

Immediately  after  this  change  in  the  law,  the  direction  of  the 
city's  subway  policy  was  transferred  from  municipal  control  to 
the  newly  created  State  Public  Service  Commission  for  the  First 
District.  This  body,  finding  itself  unable  to  secure  bids  for  the 
combined  construction  and  operation  of  new  lines  by  private 
capital  under  the  Elsberg  Amendments,  began  direct  construction 


230 


New  York  City's  Finances  and 


with  money  borrowed  by  the  city,  as  the  present  administration 
is  doing,  without  waiting  to  make  arrangements  for  their  opera- 
tion when  completed.  The  planning  of  the  lines  was  entirely  the 
work  of  the  public  authorities.  They  adopted  an  ambitious  project 
for  a  general  system  of  new  subways  known  as  the  ''Triborough 
system,"  presumably  for  independent  municipal  operation,  and 
b^an  the  immediate  construction  of  three  links  of  this  system  — 
first,  a  line  under  Fourth  Avenue  in  Brooklyn;  second,  a  series  of 
short  lines  in  Manhattan  and  Brooklyn  designed  to  link  up  the 
bridge-heads  of  the  Manhattan,  Brooklyn  and  Williamsburg 
Bridges,  and  to  form  what  was  called  a  Manhattan-Brooklyn 
Loop  system;  and  third,  a  new  trunkline  in  Manhattan  under 
upper  Lexington  Avenue,  which  was  meant  to  continue  south- 
ward under  35th  Street,  Fifth  Avenue  and  Broadway  to  the  City 
Hall,  where  it  was  to  connect  with  Brooklyn  by  means  of  the 
"loop''  lines.  Work  was  commenced  in  1907  on  the  Biooklyn- 
4th  Avenue  line,  and  on  the  Manhattan  portion  of  the  ''loop'' 
lines,  and  in  1911  on  the  Lexington  Avenue  line.  Before  the  latter 
date  negotiations  had  already  begun  for  the  possible  operation  of 
the  new  lines  when  completed  by  either  the  Interborough  or  the 
Brooklyn  Rapid  Transit  Company,  or  of  different  portions  of  the 
system  by  both  companies.  These  negotiations  were  protracted 
from  year  to  year,  while  the  city  went  on  putting  money  into  the 
new  subways.  By  December  31,  1912  the  city  had  already  ex- 
pmded  $32,159,000^  on  the  new  lines  and  no  contract  had  yet 
been  made  for  thdr  operation.  It  was  at  this  point  that  the  Dual 
Contracts  were  signed. 

The  Dual  Contracts  provided  for  the  completion  of  a  new  sys- 
tem of  subways  into  which  the  sections  already  built  or  wider 
oonstniction  would  fit  as  links.  Influential  opinion  favored  the 
participation  by  both  the  Interborough  and  the  B.  R.  T.  in  the 
operation  of  the  new  lines.  Members  of  the  Public  Service 
Conunission  beUeved  that  the  plan  for  dual  operation  was  far 
superior  to  operation  by  a  angle  company.''^  Accordingly,  con- 
tracts were  made  with  the  Interborough  covering  a  part  of  the 

^  Report,  Public  Service  CommMwiwi  for  1912, 1,  S5(K8S0i 
'/Mi,  pp.  82,84. 


Financial  Administratoon:  Subway  Finance  231 

new  lines  and  with  the  B.  R.  T.  for  the  remainder.  These  are  the 
so-called  Dual  Contracts  which  were  dated  March  19,  1913. 

Bauiea  Constructed 

The  contract  with  the  Interborough,  known  as  Contract  No.  3, 
provided  for  the  completion  of  the  upper  Lexington  Avenue  line 
in  Manhattan,  which  would  be  linked  with  the  Interborougji's 
lower  East  Side  line.  A  new  line  was  to  be  built  on  the  lower 
West  Side  from  Times  Square  southward  to  the  Battery,  with  a 
branch  line  to  Brooklyn,  via  Old  Slip  and  a  tunnel  under  the 
East  River,  to  connect  with  the  existing  Brooklyn  subway  at  a 
point  near  Fulton  and  Joralemon  Streets.  The  existing  Brooklyn 
subway,  which  had  been  built  under  the  contract  of  1902  and  was 
already  in  operation  by  the  Interborough,  was  to  be  extended 
from  Atlantic  and  Flatbush  Avenues  to  Eastern  Parkway  and 
Buffalo  Avenues,  forking  at  that  point  into  two  branches,  one  to 
terminate  at  Noetrand  and  Flatbush  Avenues,  the  othear  at 
Livonia  and  New  Lots  Avenues.  A  new  line  was  to  be  built  under 
42d  Street,  Manhattan,  from  Broadway  to  the  East  River,  con- 
tinuing through  the  so-called  Steinway  Tunnel  imder  the  East 
River  to  the  Borough  of  Queens,  and  dividing  at  Queensborou^ 
Plaza  into  two  branches,  one  to  Astoria  and  another  to  Corona. 
Finally,  a  branch  extension  was  to  be  constructed  from  a  junction 
with  the  Lenox  Avenue  division  of  the  existing  upper  West  Side 
line  at  178th  Street  to  White  Plains  Road  and  241st  Stxeet. 
Several  of  the  extensions  in  outlying  districts  were  to  be  elevated 
hnes.  All  the  new  Unes  provided  for  under  Contract  No.  3  have 
finally  been  completed,  some  of  them  after  great  delay. 

The  contract  with  the  Brooklyn  Rapid  Transit  interests  known 
as  Contract  No.  4,  was  made  with  a  subsidiary  company  called 
the  New  York  Municipal  Railway  Corporation.  It  provided  for 
the  taking  over  of  the  Brooklyn-4th  Avenue  Une  already  con- 
structed by  the  city,  with  certain  extensions  in  Brooklyn,  and  for 
the  esctension  of  this  line  from  its  northern  Brooklyn  terminus 
under  the  East  River  by  way  of  the  so-ciJled  Montague  Street 
tunnel  to  Whitehall  Street,  Manhattan,  and  thence  in  Man- 
hattan under  Church  Street,  Trinity  Place  and  Vesey  Street  to 


232 


New  Yobx  CnVs  Financbs  and 


Broadway,  continuing  northward  under  Broadway  and  7th 
Avenue  to  59th  Street  and  thence  eastward  under  59th  and  60th 
Streets  via  the  Queensborough  Bridge  to  Queensborough  Plaza, 
where  a  jtmction  was  to  be  effected  with  the  new  Stonway  Tunnel 
line  to  be  built  by  the  Interborough  under  Contract  No.  3.  An 
additional  connection  between  the  Brooklyn  and  Manhattan 
portions  of  this  trunkline  was  to  be  constructed,  leaving  the  wiflin 
Brooklyn  line  at  Willoughby  Street  and  Flatbush  Avenue  Ex- 
tension, crossing  the  East  River  via  the  Manhattan  Bridge,  and 
continuing  under  Canal  Street,  Manhattan,  to  rejoin  the  Mon- 
tague Street  tunnel  line  in  Manhattan  at  Broadway  and  Canal 
Street.  These  two  routes  between  Manhattan  and  Broddyn 
were  to  be  linked  together  in  Manhattan  by  the  so-called  Nassau- 
Broad  Street  subway,  leaving  the  Montague  Street  tunnel  line  at 
Whitehall  Street  and  the  East  River  and  running  north  under 
Broad  and  Nassau  Streets  to  the  Municipal  Building.  Here  it  was 
to  join  the  so-called  Centre  Stieet  subway,  already  built  by  the 
dty,  which  continued  northward  from  the  Municipal  Building 
under  Centre  and  Delancey  Streets,  to  the  Manhattan  end  of  the 
Williamsburg  Bridge,  crossing  and  connecting  with  the  new 
Manhattan  Bridge  line  from  Brooklyn  at  Canal  Street.  In  addi- 
tion to  this  trunk-line  system  there  was  to  be  constructed  in 
Brooklyn  the  so-called  Culver  line  from  a  point  on  the  Brooklyn, 
4th  Avenue  line  near  38th  Street  to  Coney  Island.  Finally, 
another  connection  between  Brooklyn  and  Manhattan  was  to  be 
effected  farther  uptown  by  the  construction  of  the  so-called  14th 
Street-Eastern  line  from  14th  Street  and  6th  Avenue  in  Man- 
hattan eastward  under  14th  Street  and  the  East  River  to  Brooklyn 
and  thence  under  Bushwick  Avenue  and  other  streets  to  a  point 
of  connectiim  with  existing  devated  lines  in  Broadway,  Brooklyn. 
As  in  the  case  of  Contract  No.  3  a  number  of  the  extensions  pro- 
vided in  outlying  districts  were  to  be  elevated  lines. 

There  was  long  delay  in  the  construction  of  some  of  the  lines 
under  Contract  No.  4.  In  particular,  disputes  arose  over  the 
completion  of  the  eastern  portions  ci  the  14th  Street  Eastern 
hne  in  Brooklyn.  This  line  was  opened  from  its  western  terminus 
at  6th  Avenue  and  14th  Street  in  Manhattan  to  Montrose  Street 


FiNANClAli  AdMINISTBATION:  StTBWAT  FINANCE 


and  Bushwick  Avenue,  Brooklyn,  on  July  1,  1924,  more  than 
eleven  years  after  the  date  of  the  contract.  Construction  on  the 
eastern  sections  of  the  line  is  still  in  progress. 

Work  has  not  been  commenced  on  the  so-called  Nassau-Broad 
Street  line  to  link  the  Municipal  Building  with  the  East  River 
tunnel  of  the  B.  M.  T.  It  is  on  account  of  failure  by  the  city  to 
construct  this  line  as  well  as  for  other  alleged  breaches  of  obliga- 
tion under  Contract  No.  4  that  the  B.  M.  T.  has  brought  a  suit 
against  the  city  for  $30,000,000  damages,  which  is  now  p^ding. 

Investment  hy  City  and  Companies 

The  terms  of  the  Dual  Contracts  secured  to  the  city  what  were 
regarded  at  ihe  time  as  two  outstanding  advantages:  first,  the 
contracts  gave  the  city  the  right  to  recapture  the  new  lines  at 
aiiy  time  after  ten  years  from  the  commencement  of  operation 
at  a  valuation  defined  in  the  contracts;^  secondly,  the  companies 
agreed  to  furnish  a  part  of  the  funds  required  for  constructing  the 
new  lines.  The  chief  disadvantage  to  the  dty  lay  in  the  fact  that 
while  it  was  obliged  to  defray  a  far  larger  proportion  of  the  con- 
struction costs  than  the  companies,  the  financial  clauses  of  the 
contract  postponed  the  payment  of  interest  and  sinking  fund 
charges  on  the  city's  outlays  to  such  heavy  cumulative  pr^erred 
payments  to  the  companies  that  the  city  has  never  received  a 
dollar  on  its  expenditures  under  the  contracts. 

Contract  No.  3  called  for  a  required  contribution  of  $58,000,000 
by  the  Interborough  to  the  cost  of  constructing  the  new  lines  to 
be  operated  by  it.  The  New  York  Municipal  Railway  Corpora- 
tion was  to  contribute  approximately  $14,000,000  toward  con- 
struction of  the  lines  to  be  built  under  Contract  No.  4.  In  addi- 
tion, the  companies  were  to  supply  the  equipment  needed  for 
the  operation  of  the  new  lines;  the  balance  of  the  construction 
costs  was  to  be  defrayed  by  the  city.  It  was  estimated  at  the 
time  the  contracts  were  made  that,  in  the  case  of  Contract  No.  3, 
this  balance  would  exactly  equal  the  amount  contributed  by  the 
company,  namdy,  $58,000,000;  actually  it  had  totalled  $110,- 
250,000  up  to  June  30,  1926.  Under  Contract  No.  4  as  against 

^  The  leoaptave  proviswQS  of  the  contracts  will  be  dealt  with  later. 


234 


New  York  City's  Finances  and 


a  contribution  of  $14,210,000  by  the  company  the  city  had  paid 
out  $167,500,000  for  construction  up  to  the  same  date.  Of  course 
included  in  these  contributions  by  the  dty  are  the  amounts 
expended  by  it  for  lines  constructed  prior  to  the  making  of  the 
contracts  and  embraced  within  their  terms,  namely,  the  Brooklyn- 
4th  Avenue  hue,  the  Centre  Street  '^loop"  and  the  earlier  sec- 
tions of  the  Leidngton  Avenue  line. 

In  comparing  the  investments  of  the  city  and  the  companies 
under  Contracts  No.  3  and  No.  4  it  must  be  noted  that  the  con- 
tracts were  tied  together  with  certain  so-called  "related  certi- 
ficates" applying  to  the  elevated  lines  already  operated  by  the 
companies.  The  companies  obligated  themsdves  and  were  given 
permission  by  the  certificates  to  extend  certain  of  these  elevated 
Unes  and  to  provide  third  tracks  and  other  improvements  on 
others.  This  involved  an  outlay  of  $43,886,000  in  the  case  of  the 
Interborough  on  account  of  the  devated  lines  in  Manhattan,  and 
of  $40,570,000  in  the  case  of  the  existing  Brooklyn  elevated  lines. 
If  these  elevated  improvements  are  included,  the  total  investments 
of  the  companies  imder  the  Dual  Contracts  are  as  follows:  ^ 

Interborough: 

Construction,  subways   $58,038,000 

Equipment,  subways   61,786,000 

Betterments,  elevated  lines   43,886,000 

Total  $163,710,000 

New  York  Rapid  Transit  Corporation: 

Construction,  new  lines   $14,210,000 

Equipment,  new  lines   35,022,000 

Betterments,  elevated  lines   40,570,000 

$  89,802,000 

There  is  an  important  difference  in  the  way  in  which  the  two 
contracts  deal  with  elevated  lines.  At  the  time  Contract  No.  4 
was  made,  the  Brooklyn  Rapid  Transit  Company  operated  no 
existing  subwa3n3  but  a  large  system  of  elevated  lines  in  Brooklyn. 

The  contract  accordingly  provided  that  the  new  subways  of  which 

^Figuras  from  Sixth  Annual  Beport,  Tnuinl  OnmrniBiiion  (1906),  pfi.  70-71, 


Financial  Adionistratiok:  Subway  Financb  235 

the  B.  R.  T.  was  to  be  the  lessee  should  form  one  system  with  these 
existing  Brooklyn  elevated  Unes.  The  revenues  from  both  were 
to  be  pooled  for  the  purpose  of  determining  the  company's 
financial  obligations  under  the  contract.  On  the  other  hand,  the 
Interborough  was  operating  the  existing  subways  and  elevated 
lines  in  Manhattan  as  separate  and  independent  systems.  In  the 
case  of  the  Interborou^,  this  separation  was  allowed  to  con- 
tinue, and  there  was  no  provision  in  the  contract  for  pooling  the 
revenues  from  the  elevated  and  subway  parts  of  the  ^t^n. 
Only  the  revenues  from  the  old  and  new  subways  were  to  be 
pooled.  For  the  purpose  of  financial  calculation  therefore  the 
elevated  operations  of  the  Interborough  must  be  kept  distinct 
from  its  subway  operations,  while  in  the  case  of  the  B.  M.  T. 
lines  the  two  must  be  considered  together. 

Revenue  to  City  and  Companies 

Contract  No.  3  with  the  Interborough  Ck>mpany  provided  that 
the  future  revenue  from  the  "original  subways"  then  in  operation 
should  be  pooled  with  that  accruing  from  the  new  Unes  to  be  built 
and/or  operated  under  the  contract.  From  the  total  revenue  thus 
obtained  there  were  to  be  paid  or  withheld  in  the  following  order 
of  priority:  (1)  The  rentals  due  to  the  dty  for  the  original  sub- 
ways under  the  terms  of  Contracts  Nos.  1  and  2  above  referred 
to;  (2)  taxes;  (3)  operating  expenses;  (4)  12  per  cent,  of  the  total 
revenue  for  maintenance  exclusive  of  depreciation;  (5)  a  sum 
to  be  annually  determined  to  be  paid  into  a  depreciation  fund 
to  cover  such  portions  of  the  railroads  as  should  not  be  repaired 
or  replaced  by  the  expenditures  for  maintenance;  (6)  an  annual 
sum  of  $6,335,000  to  be  retained  by  the  lessee  ''as  representing 
the  average  annual  income"  previously  derived  by  the  lessee 
from  the  operation  of  the  original  subways  then  CTsting;  (7) 
interest  at  6  per  cent,  to  be  paid  to  the  lessee  on  the  lessee's 
outlays  under  the  contract  toward  the  cost  of  constructing 
and  eqiupping  the  new  subways,  the  total  of  such  contribution 
not  to  exceed  $80,000,000;  (8)  annual  interest  payable  by  the 
lessee  on  sums  expended  for  any  "additional"  equipment,  as  de- 
fined by  the  contract  which  might  be  needed  for  operation, 


236 


Nmw  York  Cmr's  Finances  and 


plus  1  per  cent,  on  these  expenditures  to  build  up  a  sinking  fund. 
After  these  deductions  the  city  was  to  become  entitled  to  re- 
ceive interest  on  its  investment  imder  the  contract  at  the  rate 
of  8.76  per  cent.,  this  bdng  the  pefcentage  of  return  which  the 
above  mentioned  payments  to  the  company  were  agreed  to  repre- 
sent on  its  total  investment  in  the  old  and  new  subways.  The 
investment  of  the  company  in  the  old  subways  was  tiierefore 
fixed  at  approximately  (47,112,000.  After  these  payments  the 
city  was  to  receive  the  interest  upon  any  amount  expended  by  it 
as  the  cost  of  ^'additions"  or  extensions  under  the  contract,  to- 
gether with  1  per  cent,  annually  as  a  sinking  fund.  Next,  1  per 
c^t.  of  the  total  rev^ue  was  to  be  paid  into  a  fund  to  cover 
posfflble  deficits  in  operation  until  this  fund  amounted  to  1  per 
cent,  of  the  total  cost  of  construction  and  equipment.  If  after 
these  deductions  were  made  any  revenue  remained,  it  was  to  be 
divided  between  the  city  and  the  lessee,  share  and  share  alike. 

Contract  No.  4  provided  for  substantially  the  same  distribu- 
tion of  revenue.  The  income  from  the  new  subways  was  to  be 
pooled  with  that  from  the  existing  Brooklyn  elevated  system,  and 
from  the  total  thus  obtained  annual  payments  were  to  be  made  in 
the  foUowmg  order  of  priority:  (I)  Rentals  for  the  use  of  property 
in  connection  witJi  both  the  existing  and  the  new  parts  of  the 
system;  (2)  taxes;  (3)  operating  expenses;  (4)  12  per  cent,  of  the 
total  revenue  for  niaintenance  exclusive  of  depreciation;  (5)  a  sum 
to  be  annually  determined  for  a  depreciation  fund  for  such  por- 
tions of  the  railroads  as  should  not  be  repaired  or  replaced  by 
the  expenditures  for  mamtenance;  (6)  an  annual  sum  of  $3,500,000 
to  be  retained  by  the  lessee  "as  representing  the  average  annual 
income  from  the  operation  of  the  existing  railroads'';  (7)  interest 
at  6  per  cent,  annually  to  be  paid  to  the  lessee  on  (a)  its  con- 
tribution toward  the  construction  of  the  new  lines;  (b)  the  cost 
of  the  equipment  furnished  by  the  lessee  for  initial  operation  of 
the  new  lines;  (c)  the  actual  cost  of  the  plant  and  property,  ex- 
tensions and  additions  to  its  fflristing  elevated  properties  uiider 
the  ''rdated  certificates" ;  (d)  the  cost  of  reconstructing  certain 
of  the  existing  lines  as  required  by  the  contract;  (8)  annual 
interest  payable  by  the  lessee  on  sums  ejq;)ended  for  "additional" 


Financial  Adminisiibatiqn:  Subway  Finangb  237 

equipment  for  Hie  new  lines,  as  d^ned  by  the  contract,  plus  1 

per  cent,  on  these  expenditures  as  a  sinking  fund.  After  these 
deductions,  the  city  was  to  become  entitled  to  receive  an  amoimt 
sufficient  to  defray  the  annual  interest  payable  upon  its  share  of 
the  cost  of  c(»istruction  of  the  new  lines  plus  one  per  cent,  for  a 
sinking  fund.  Next,  the  city  was  to  receive  the  interest  upon 
any  amount  expended  by  it  as  the  cost  of  additions  or  extensions 
under  the  contract,  plus  one  per  cent,  for  a  sinking  fund.  One 
per  of  the  total  revmue  was  then  to  be  paid  into  a  sinking 
fund  to  cover  deficits  in  operation  until  such  fund  amounted  to 
one  per  cent,  of  the  total  cost  of  construction  and  equipment. 
If  any  revenue  still  remained,  it  was  to  be  divided  equally  between 
the  city  and  the  lessee. 

Under  both  contracts  deficits  in  eadi  item  were  to  be  cumu- 
lative, "and  payments  of  such  deficits  were  to  be  made  in  full 
before  deducting  the  amounts  required  in  the  paragraph  succeed- 
ing the  paragraph  providing  for  the  payment  of  the  deductions  as 
to  whidi  there  has  been  such  d^ydt."  Interest  on  such  deficits 
was  to  be  charged  at  the  rate  payable  by  the  lessee  or  the  city 
and  was  to  be  compounded  semi-annually. 

Recapture  Clauses 

The  recapture  clauses  inserted  in  the  Dual  Contracts  are  im- 
portant because  of  the  insistence  upon  them  at  the  time  the 
contracts  were  made  and  because  they  were  then  thought  to  have 
gtvm  the  dty  a  lev^^^  to  protect  its  position  under  the  con- 
tracts. The  contracts  provided  that  the  lease  of  the  lines  to  the 
companies  was  to  be  for  forty-nine  years,  from  the  commencement 
of  operations,  without  the  privilege  of  renewal;  and  that  the  lease 
of  the  old  subways  to  the  Interborough  under  Contracts  No.  1 
and  No.  2  was  to  be  'levelled"  so  as  to  terminate  at  the  same 
time.  Under  each  contract  the  right  to  recapture  the  new  lines 
was  to  accrue  to  the  city  ten  years  after  the  commencement  of 
operations.  In  the  case  of  Contract  No.  3  the  right  might  be 
exercised  either  as  to  the  whole  new  system,  or  separately  as  to 
one  or  more  of  the  four  sections  into  which  it  was  divided:  (1) 
the  upper-Lexington-lower-7th  Avenue  line,  consisting  of  three 


238  New  York  City's  Finances  and 


isolated  links :  (a)  the  Lexington  Avenue  line  above  Grand  Central 
Station;  (b)  the  lower  7th  Avenue  line  to  its  connection  with  the 
old  subway  at  Fulton  and  Joralemon  Streets,  Brooklyn;  (2)  the 
Brooklyn  extension  of  the  old  subway  east  of  Atlantic  and 
Flatbush  Avenues.  The  continuity  of  this  line  was  broken 
between  Grand  Central  Station  and  Times  Square,  and  between 
Fulton  and  Joral^on  Streets,  Brooklyn,  and  Atlantic  and 
Flatbush  Avraiues,  Brooklyn,  by  portions  of  the  original  subway 
which  are  not  subject  to  recapture;  (3)  the  42d-Street-Stdnway 
Tunnel  Une,  with  its  extensions  in  Queens;  (4)  the  White  Plains 
Road  extension.  In  the  event  of  recapture  of  one  of  the  separate 
sections,  the  ri|^t  to  such  recapture  was  to  accrue  ten  years 
after  actual  commencement  of  operations  upon  such  separate 
line,  while  the  right  to  recapture  the  system  as  a  whole  was  to 
accrue  ten  years  from  the  commencement  of  operations  upon 
any  part  of  the  railroad. 

For  exercifflng  the  right  of  reci^ture  it  was  provided  that  the 
city  must  pay  to  the  company  a  sum  based  upon  the  company's 
contribution  to  the  cost  of  construction  and  equipment  to  be 
calculated  in  the  following  way.  There  was  first  to  be  added  to 
the  total  of  such  contribution  for  construction  and  equipment 
15  per  cent,  of  such  total,  and  of  the  115  per  cent,  of  the  com- 
pany's contribution  thus  resulting,  the  amount  to  be  paid  by  the 
city  on  recapture  was  to  decrease  by  l-39th  in  each  successive  year 
oi  the  thirty-nine  years  that  the  contract  was  to  run  after  the 
right  of  recapture  accrued.  Thus  if  operation  <rf  the  system  com- 
menced in  1917,  the  city's  right  to  recapture  would  accrue  in 
1927  and  if  it  were  exercised  in  1935  the  city  would  have  to  pay 
to  the  company  31-39  of  115  per  cent,  of  the  company's 
initial  investmait.  The  city  was  to  pay  ccnnpensation  for 
''additional"  lines  or  equipment  in  accordance  witii  a  siinilar 
schedule. 

It  will  be  remembered  that  a  right  of  recapture  had  not  been 
reserved  by  the  city  in  Contracts  No.  1  and  No.  2  covering  the 
ori^al  subways,  and  this  ri^t  was  not  given  to  the  city  by 
Contract  No.  3.  The  upper  West  Side  Hne  with  its  Lenox  Avenue 
Branch,  the  42d  Street  shuttle  from  Times  Square  to  the  Grand 
C^tral  Station,  the  lower  East  Side  line  from  42d  Street  to 


Financial  Adionistbation:  Subway  Finance  239 


Atlantic  and  Flatbush  Avenues,  Brooklyn,  constituting  those 
original  lines,  are  therefore  exempt  from  recapture.  For  this 
reason  if  the  city  should  choose  to  exercise  its  right  to  recapture 
the  new  lines  on  the  upper  East  Side  and  lower  West  Side  they 
would  constitute  only  isolated  links  which  could  not  be  operated 
as  a  system.  To  prevent  this  result,  Contract  No.  3  provided  that 
in  the  event  of  the  city's  determining  to  use  its  right  of  recapture, 
it  might  exchange  its  upper  East  Side  Une  for  the  old  upper  West 
Side  line,  or  its  lower  West  Side  line  for  the  old  tower  East  Side 
Une  so  as  to  give  it  a  through  line,  capable  of  bdng  operated 
independently.  In  the  event  of  such  an  exchange  ''the  difference 
in  the  value  of  the  right  to  operate  the  portion  of  the  existing 
railroad  under  Contracts  No.  1  and  No.  2  and  the  value  of  the 
right  to  operate  the  new  line  so  exchanged  therefor"  was  to  be 
"adjusted  and  paid  between  the  city  and  the  lessee."  This 
adjustment  was  to  be  made  on  terms  which,  it  has  been 
estimated,  would  require  an  additional  payment  by  the  city  of 
$10,000,000  if  it  should  decide  to  take  ov^  tlie  complete  East 
Side  Une,  and  thus  exchange  the  downtown  legs  of  the  two  sub- 
ways, or  an  additional  charge  of  $24,300,000  if  the  uptown 
legs  are  exchanged  so  that  the  city  will  control  the  West  Side 
subway.^ 

The  recapture  provirions  of  Contract  No.  4  are  substantially 

the  same  as  those  of  Contract  No.  3,  except  of  course  that  there  is 
no  provision  for  exchange  of  lines.  Ten  years  after  the  com- 
mencement of  operation,  the  new  lines  may  be  either  recaptured 
as  a  whole  or  separately  in  three  parts:  (1)  Broadway-4th  Avmue 
Une;  (2)  Culver  line;  (3)  14th  Street  Eastern  line.  As  in  the  case 
of  Contract  No.  3,  the  recapture  price  is  based  upon  the  total 
contribution  of  the  company  to  cost  of  construction  and  equip- 
ment plus  15  p^  oeut.,  this  sum  to  decrease  annually  by  l-39th 
in  each  successive  year  of  the  thirty-nine  years  that  the  contract 
will  run  after  the  right  of  recapture  accrues.  It  is  provided  that 
if  the  right  of  termination  is  exercised  as  to  the  Broadway-4th 
Avenue  line  separately,  the  rental  im>visions  of  the  contract  are 
to  be  readjusted  by  arbitration  if  necessary. 

1  See  McAneny  teBtlmony  More  Coinmiiwkwiffl'  McAvo^  Mordand  Act  Investigar 
tiini,pp.25,89. 


240  New  York  City's  Finances  and 


Extensions 

In  addition  to  the  provisions  of  Contracts  Nos.  3  and  4  idating 
to  the  specific  lines  prescribed  in  the  contracts,  there  are  other 
provisions  covering  possible  future  extensions.  The  companies 
agree  that  if  such  extensions  are  determined  upon  by  the  city, 
they  will  operate  them  in  connection  with  the  lines  built  under 
the  contract.  The  ocMnpanieSy  however,  have  an  option  to  decide 
whether  or  not  they  will  operate  such  new  extensions  under  the 
financial  arrangements  prescribed  by  the  contract.  If  they  refuse 
to  do  this,  they  may  be  required  to  operate  the  extension  as  a 
part  of  the  i^rstem,  but  upon  terms  which  would  entitle  them,  in 
case  the  ext^isbns  were  not  sdfnsupporting,  to  repay  to  them- 
selves interest  and  sinking  fund  charges  on  their  investment  in 
the  extension  out  of  the  revenue  of  the  entire  system,  and  the 
deficits  accruing  from  the  failure  (rf  the  extensions  to  meet  such 
interest  and  sinking  fund  charges  are  to  be  cumulative  preferred 
charges  against  the  revenue  of  the  whole  system  before  any  pay- 
ments may  be  made  therefrom  to  the  city. 

ni.  Financial  Results  of  the  Dual  Contracto 

Construction  work  under  the  Dual  Contracts  is  still  going  on, 
but  the  main  portions  of  the  new  Unes  were  brought  into  opera- 
tion in  1918.  The  so-called  Centre  Street  "loop,"  whidi  had  been 
completed  by  the  dty  before  the  Dual  Contracts  were  signed, 
commenced  operation  August  4,  1913,  and  a  part  of  the  so-called 
Steinway  Tunnel  line  was  placed  in  use  June  22,  1915.  The  7th 
Avenue  line  below  Times  Square  was  opened  as  far  south  as  the 
Pen^lvania  Station  June  2, 1917,  and  in  September  ctf  the  same 
year  the  Manhattan  Bridge  route  of  the  B.  M.  T.  began  to 
operate  in  Manhattan  northward  to  Union  Square.  The  main 
portions  of  the  upper  Lexington  Avenue  and  lower  7th  Avenue 
Unes  of  the  Interborough  were  placed  in  operation  July  17,  and 
July  1,  1918,  respectively,  and  m  August  1,  through  north  and 
south  traffic  on  these  lines  began.  The  main  Broadway  line  of 
the  B.  M.  T.  subway  reached  Times  Square  January  5,  1918,  but 
the  northern  and  southern  links  were  not  opened  until  IWK), 


Financial  AnMimsffRATioH:  Subway  Financb 


241 


when  the  lines  from  Manhattan  to  Queensboiou^  Plaza,  the 
Montague  Street  tunnel  to  Brooklyn,  and  the  Culver  line  to 
Coney  Island  were  completed.  The  eastern  extensions  of  the 
Interborough  subways  in  Brooklyn  were  opened  in  the  spring  of 
1919  and  the  principal  part  of  the  14th  Street  Eastern  line  m 
1924.  The  eastmi  end  of  the  latter  hne  is  still  under  construction, 
and  work  has  not  been  commenced  on  the  so-called  Nassau- 
Broad  Street  subway  of  the  B.  M.  T. 

Since  1918  the  history  of  the  Dual  Contracts  has  been  one  of 
almost  continuous  friction  and  controversy,  not  merely  between 
city  and  the  companies,  but  between  the  different  pubhc  author- 
ities to  which  from  time  to  time  supervisory  duties  over  the 
subways  have  been  committed.  The  controversy  betwe^  the 
companies  and  the  dty  has  revolved  about  the  contention  of  the 
fornix  that  the  dty  authorities  have  been  dilatory  in  fulfilling 
then-  obUgations  under  the  contracts,  principally  in  connection 
with  the  construction  of  certain  yards  and  repau-  shops,  and  also 
with  appropriations  of  money  and  approval  of  contracts  for  the 
construction  of  uncompleted  Imes.  The  resulting  controversies 
have  further  delayed  progress  under  the  contracts,  and  as  tune 
went  on,  these  delays  have  been  increased  by  a  variety  of  sug- 
gestions as  to  plans  for  building  additional  subways.  The  control 
of  subway  construction  was  taken  from  the  Pubhc  Service 
Commission  in  1919,  and  placed  in  the  hands  of  a  municipal 
official,  the  Transit  Construction  Commissioner,  from  whom  it 
was  in  turn  taken  in  1921  and  entrusted  to  a  new  state  body 
known  as  the  Transit  Commisdon,  a  portion  of  whose  duties 
WW  in  1924  again  transfmed  back  to  a  municipal  body  the 
present  Board  of  Transportation.  ' 

The  history  of  these  controversies  hes  outdde  the  fidd  of  the 
present  discussion.  The  unmediate  point  of  interest  is  the 
financial  result  for  the  city  and  the  companies  from  the  operation 

the  rental  cUuses  of  the  Dual  Contracts.  This  is  shown  on  the 
table  (Table  III). 

From  this  table  it  appears  that  the  year  endmg  June  30  1926 
was  the  first  in  whidi  any  substantial  surplus  was  produced  over 
and  above  the  preferential  sums  to  which  the  companies  were 


Ksw  YoBK  City's  Fimancss  and 


Financial  Adminisibation:  Subway  Financb  243 


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244  New  Yobk  City's  Finances  and 

entitled  under  the  Dual  Contracts.  This  surplus  amounted  in 
the  case  of  the  Intefborough  to  S2|903yd08.889  or  more  than 
$5,000,000  less  than  the  sum  to  which  the  city  is  annually  entitled 
under  Contract  No.  3.  In  actual  fact,  however,  the  city  was 
entitled  to  receive  none  of  the  1926  surplus  because  of  the  large 
accumulated  deficit  in  the  company's  preferred  charges  for 
preceding  years.  In  the  case  (rf  Contract  No.  4,  the  surplus  above 
company  charges  amoimted  in  1926  to  only  $770,328,  or  more 
than  $7,000,000  less  than  the  city  would  have  been  entitled  to 
receive  in  the  absence  of  accumulated  deficits  owing  to  the 
company.  It  is  therefore  apparent  that  opmtions  under  the 
contracts  have  completely  failed  to  produce  sufficient  revenue 
to  pay  to  the  city  what  it  was  entitled  to  receive.  In  order  to 
produce  enough  for  the  latter  purpose,  the  gross  revenue  from 
operation  would  have  had  to  amount,  in  the  case  of  the  Inter- 
borough,  to  $44,238,000  instead  of  the  actual  figure  of  $39,214,000. 
To  produce  this  sum,  the  784,280,000  passengers  carried  during 
the  year  by  the  Interborough's  subway  system  would  have  had 
to  pay  a  fare  of  approximately  5.7^.  In  the  case  of  Contract  No. 
4,  the  fare  would  have  had  to  be  ai^roximately  6.2^  to  yield 
suffident  to  pay  the  sum  due  to  the  city.  It  is  furthermore  to 
be  noted  that  1926  was  an  exceptionally  good  year  for  both  com- 
panies, showing  a  large  increase  in  the  number  of  passengers 
carried  on  both  lines,  and  in  the  case  of  the  Interboioug^  a 
great  reduction  in  the  ratio  of  operating  expenses  to  operating 
revenue.  In  1927  this  ratio  amounted  to  only  52.1  per  cent.,  as 
against  a  high  point  of  62.6  per  cent,  in  1921.  It  is  also  to  be 
noted  that  the  seven  months  ending  Jan.  30,  1927,  showed  a 
marked  decrease  in  the  surplus  above  the  company's  preferred 
charges. 

It  therefore  seems  fair  to  infer  that  the  present  traffic  borne  by 
the  subways,  taken  together  with  the  cost  of  operation  at  present 
prices  for  materials  and  labor,  holds  out  no  immediate  hope  for 
any  return  on  the  city's  investment.  Even  should  the  Inter- 
borough  be  able  in  the  next  few  years  to  increase  the  annual 
number  of  passengers  carried,  and  still  further  decrease  its 
ofwating  ratio,  the  inauguration  of  serviee  on  the  new  Fort 


Financial  Administration:  Subway  Finance  245 


Washington-8th  Avenue  subway,  now  being  built  by  the  city, 
may  be  expeoi&i  for  a  time  to  put  an  ^d  to  this  increased  traffie, 
and  a  period  may  be  expected  to  ensue  when  the  Interborou^ 

subways  will  carry  actually  a  smaller  number  of  passengers  than 
for  several  years  past.  In  spite,  therefore,  of  the  relatively  good 
showing  made  by  the  Interborough  in  the  year  1926,  there  seems 
little  reason  to  expect  that  the  syston  will  be  able  to  bear  the 
burdens  of  the  full  payments  to  both  city  and  company  pre- 
scribed by  the  Dual  Contracts.  This  failure  falls,  at  present, 
almost  wholly  upon  the  city  in  the  case  of  Contract  No.  3,  since 
the  revenue  has  in  recent  years  been  approximately  sufficient  to 
yield  the  amount  due  under  the  contract  to  the  Interborough. 
The  accumulated  deficits  in  payments  to  the  company  amoimt  to 
only  a  Uttle  over  $5,000,000,  the  remaining  $2,718,000  now  due 
to  the  company  representing  compound  interest  on  the  former 
sum. 

In  the  case  of  the  B.  M.  T.  system,  from  August  4,  1913,  when 
the  Centre  Street  loop  line  went  into  operation,  down  to  July  1, 
1926,  the  revenue  received  from  operation  failed  by  more  than 
$17,000,000  to  yield  tibe  sums  to  which  the  company  was  ^titled 
under  Contract  No.  4.  The  ratio  of  operating  expenses  to  operat- 
ing revenues  has  at  times  been  unbelievably  high,  apparently 
amounting  in  1921  to  almost  90  per  cent.  In  1926  the  system 
earned  sufficient  to  pay  the  full  sum  to  which  the  company  was 
entitled  und^  Contract  No.  4,  but  practically  no  more.  Mean- 
while the  operating  ratio  continues  high,  amounting  in  1924  to 
66.3  per  cent. 

The  present  financial  aspect  of  the  Rapid  Transit  situatbn  is 
therefore  as  foUows:  the  Interborough  seems,  for  the  preset, 
assured  of  its  prefOTed  payments  from  subway  operations.  The 
commencement  of  service  on  the  new  municipal  system  now  under 
construction  can  be  expected,  however,  materially  to  cut  down 
recdpts  from  its  present  subway  lines.  Meanwhile,  the  re- 
organized Brooklyn-Manhattan  Transit  Corporation,  the  suc- 
cessor of  the  B.  R.  T.,  remains  at  present  in  annual  danger  of  not 
receiving  all  that  it  is  entitled  to  under  its  contract.  It  can, 
therefor^  be  anticipated  tiiat  within  the  next  few  ymn  the 


246 


New  York  City's  Finances 


situation  of  the  companies  themselves  may  force  a  reconsideration 
of  the  financial  aspects  of  the  transit  problem  and  a  readjustment 
of  revenues  and  charges  wholly  apart  from  the  question  of  the 
financial  burden  upon  the  city.  The  city  has  been  taking  losses 
continually  from  the  beginning.  When  the  new  subway  system 
comes  into  operation,  the  prospective  losses  which  it  may  threaten 
for  the  companies  will  furnish  added  reason  for  reexamining  the 
city's  position  in  order  that  it  may,  so  far  as  possible,  be  protected. 

In  addition  to  the  question  of  the  continued  burden  on  the 
budget  due  to  the  city's  investment  in  the  existing  subways, 
there  remains  the  further  question  of  how  the  cost  is  to  be  de- 
frayed of  the  system  of  new  lines  now  projected.  The  extent  of 
this  burden  will  depend  upon  the  method  of  financing  adopted, 
and  largely  upon  the  question  of  whether  the  decision  is  reached 
to  issue  long-term  or  short-term  bonds. 


APPEN 


BmSF  FiNANGIAIf  SrATraiSNT 


THE  CITY  OF  NEW  YORK— 


Gbablbs 

COMP 


WHAT  THE  CITY  HKBTVED  IN  im 


Tm^,  Assessments,  and  Water  Rates   1390,282,506^ 

Levy  of  1926— From  Real  Estate  Taxes: 

Borough  of 

Manhattan  .    .  $181,276,405.91 


The  Bronx 
Brooklyii 
Queens  . 
Richmond 


28,402,250.24 
75,119,145.66 

27,781,467.93 
3,999,312.31 


Levy  of  1926— From  Personal  Taxes: 
Borough  of 

Manhattan  .    .  $1,755,168.61 


The  Bronx 
Brooklyn 
Queens  . 
RidimoBd . 


83,388.32 
237,137.69 
64,866.30 
21,640JS0 


Levies  of  1925  and  Prior  Years — 
From  Real  Estate  Taxes: 

Borough  of 

Manhattan  .    .  $9,971,306.77 


The  Bronx 
BrookljHEi 
Quems  . 
Rudunond 


3,720,240.32 
11,833,410.90 
4,521,288.63 
1,457,414.84 


Levies  of  1925  and  Prior  Years— 
Fkom  Personal  Taxes: 
Borougli  of 

Manhattan  .    .  $38,627.46 


The  Bronx 
Brooklyn 
Queens 
Richmond 


7,211.10 
7,199.33 
2,430.87 
580.30 


248 


$316^78,581.95 


2462,101.^ 
$318,730,683^7 


31,608,661.46 


66,049.06 


$350,290,393.89 


DIX  A 

OF  New  York  Crnr 
DEPARTMENT  OF  FINANCE 
W.  Bkbst 

TBOLLER 

WHAT  THE  CITY  PAID  OUT  IN  1926 
AcoouMT  OF  EXPENSES  of  thb  CITY  GOVERNMENT 

1.  Executive  (General  Administiation)  .    .    .  $3,297,746.43 

2.  Finance  and  Taxation   3,647,777.22  $6,845,523.65 

3.  Legislative  (Board  of  Aldermen  and  (Sty  Qerk)  ....  644,182.43 

4.  Board  of  Elections  .............  1  907  160.54 

5.  Judicial  and  Semi-Judicial   16!568!05l!99 

6.  Educational: 

(a)  Bourd  of  Education;  City  and  Hunter 

CoUeges  $111,942,043.11 

(b)  Libianes   2,554,267.24  114^496^10.35 


7.  Recreation,  Science  and  Art: 

(£i  Parks,  Parkways  and  Drives  .  . 
(b)  Zoological  and  Botanical  Gaidens, 
Museums,  eto.  


$5,782,716.22 

2,641,472.75 


8,424,188.97 


8.  Health  and  Sanitation   38  230  313  19 

in  Sil^^'^PPl^T       '  A  ^  '  -  '    •    •    •   li;675;227.*09 

10.  Protection  of  Life  and  Ploperty   64,448,660.34 

11.  Correctional  Purposes   2,660, 676^42 

12.  PubUc  Welfare   22,572  687^21 

13.  Streets,  Highwajns  and  Bridges  (Caie  and 

Maintenance)   15,903,078.26 

14.  PubUc  Buildings  and  Offices  (Care  and 

Maintenance)   5,448,193.70 

16.  Publication,  Advertising  and  Printing   2,629,343.33 

16.  Public  Enterprises  (Docks,  Ferries,  ete.)   12,994,296!57 

17.  Pension  and  ReUef  Funds,  etc   15,078,892!78 

18.  Taxes  and  Rents   1,549, 191  !oi 

19.  Memorial  and  Independence  Day  Observance   157^575!  12 


249 


1341,233,552.95 


250 


Nbw  Yobk  Cmr's  Finances  and 


WHAT  THB  CITY  BSCBIVED  IN  19m 


Brought  forward  

Assessments  for  Local  Improvements: 
Borough  of 

Manhattan  .    .  $1,103,679.43 

The  Bronx  .    .  5,932,980.92 

Brooklyn     .    .  4,670,756.98 

Queens   .        .  6,516,848.80 

Riehmond   .    .  461,556.73 


1350,290,383^ 


18,685,822.86 


Water  Kates: 

Bevenue  bom  Water 
Rates  and  Water 
Meter  Rentals 

Interest  on  Water 
Rates  .... 


$21,232,466.15 

73,823.93  21,306,290.08 


$390,282,506.83 


2.  Special  Taxes  

Bank  Tax  

Tax  on  Moneyed  Capital  . 
Mortgage  Tax — City's  Share  . 
Corporation  Tax — City's  Share 
State  Income  Tax — City's  Share 
Motor  Vehicle  Tax— City's  Share 
Real  Estate  Broken' and  Saksmoi's  Tn 


$6,887,426.02 
573,249.00 
4,722,020.81 
7,641,698.03 
18,186,432.83 
2,724,050.70 
96,537.09 

$40,831,424.38 


8.  Franebises  and  Privileges  

3a.  Rentals  from  Subways — ^Interborough 
Rapid  Transit  Company,  as  Lenee  .  . 
Rentals  from  Docks,  Femes,  and  Batbuot 
TranaixMrtatimi  

Dock  and  Sip  Rents  

Municipal  Ferries— Fares  and  Privileges 

Ferry  Leases— From  Leases  ol  Feny  Sips 
to  Corporations  

SmCaee  Transportation— Staten  Idand 
Midland  Railroad  and  WiDianw- 
bttigli  Bridge  Trolky  line  .    .  . 


$2,651,403.70 

§$11,822,195.04 

$7,206,959.08 
8,299,965.06 

471,417.25 

843,833.65 
§$11,822,195.04 


Licenses  and  Pnmits  ^ 
Depfurtmental  Permits 
Marriage  Licenses  . 
All  other  Licenses  . 


  $1,111,081.57 

  163,618.00 

  1,527,561.93 

$830g,a61JiO 

5.  Fees,  Fines,  Penalties,  and  Forfeitures  

6.  Income  from  City  Properties  (Market,  House,  Ground,  and 

Oftlier  Rentab)  


$40,831,424.38 


3,011,959.94 


H473^74 


2,802,261.50 


$1,133,361.78 


FmANCTAL  ADMmiSlBATtON:  AmBNBIX  A  251 

WUAT  THS  CITY  PAID  OUT  Ilf  1996 

Brought  forward   $341,233,552.95 

20.  Taxes  paid  to  State   17,564,808.49 

21.  Refunds  of  Sundry  Revenues   2,901,348.66 

22.  Interest  on  the  City  Debt  $66,131,977.56 

Amount  tbeieof  paid  to  aty  Sinking  Funds  9,772,716.73 


Total  Interest  paid  to  Public  and  to  Pension  Funds  .  56,359,260.83 


Total  Patmkntb  account  of  Cuksbnt  E!zpbnsbs  $418,058,970.93 

Redemptionof  City  Debt  (Long-term  Bonds)  $31,685,129.74 
Debt  Redeemed-HHrluch  was  hdd  by  Sinking 

Funds                                                    16,856,654.82  14,828,474.92 


Total  Disbursements  for  Current  Expenses  and 
Debt  IIedemption,  after  Deducting  all  Inter  Se 

 $432,887,445.85 


OUTLAYS  TOR  PERMANENT  IMPROVEMENTS, 

Paid  from  Corporate  Stock,  Serial  Bonds,  and  Tax  Nohb 

JVir  Rapid  Transit  Construction  $50,774,182.35 

New  Catskill  Water  Supply   2,702,284.29 

Docks                                                       2,158,788.02  $55,635,254.66 

Department  of  Water  Supply,  Gas  and  Electricity  ....  5,211,217.27 

Street  Improvement  Fund   30,199,346.89 

Fund  for  Street  and  Park  Openings   8,779,035.00 

School  Construction  and  Equipment   19,393,865.45 

D^Mtrtment  of  Parks,  All  Boroughs   1,765,320.16 

Borough  Presidents,  Construction  of  Highways,  etc.     .    .    .  8,664,513.42 

Department  of  Plant  and  Structmres   4,255,776.78 

New  Court  House,  New  York  County   2,922,592.42 

New  Municipal  Buildings,  Brooklyn   1,315,339.63 

Department  of  Public  Markets   1,554,155.38 

Department  of  Public  Welfare  $2,337,554.19 

Bellevue  and  Allied  Hospitak                          1,207,999.38  3,545,553.57 

Armory  Board   190,249.75 

Fire  Department   508,469.10 

Police  Department   656,364.14 

Health  Department   156,393.27 

Department  of  Street  Cleaning     .   288,098.88 

Westchester  Ooonty  Pwk  OomniiflBion  (Brniz  Fukwiy  Com- 
mission)   637,040.58 

Simdiy  Other  Departments   729,295.41 


$146,407,901.76 


252  New  Yom  City's  Finances  and 

WHAT  THE  CITY  RECEIVED  IN  1996 

7.  Reimbursements  by  Street  Railway  Companies  for  Repaying 

Costs  within  Railroad  Areas,  and  Other  Reimburse- 
ments   ^  229  491.16 

8.  EombursementB  for  Boflird  and  Mftinteiuuloe  at  City  Insti-  '  ' 

tutions   727  396.82 

9.  State  Aid  for  Schools   21,56o!67o!38 

10.  Interest  on  Taxes,  Assessments,  Bank  Balances,  etc.       .    .  7,316,448.06 

Ih         of  City  Property   1,685,573.20 

12.  Prenuum  from  Loot^enn  Bcmd  SakB  to  Pliblie    ....  794,175.00 

13.  Miscellaneous   1,848,440.87 

Total  Rbcbipts  (Exclusive  of  Loans)   $497,095,851.14 

14.  Borrowings  from  Public  and  Pension  Funds   482|27Q^000.00 

Corporate  Stock  and  Serial  Bonds    .    .  $75,000,000.00 

Corporate  Stock  Notes   118,295,000.00 

Tax  Notes   16,500,000.00 

Special  Revenue  Bonds   28)125,000.00 

Revenue  Bills  (in  anticipation  of  CoDeo- 
tion  of  Taxes)    244,350,000.00 

$482,270,OOaOO 

15.  Sale  of  Securities  by  Sinking  Funds  to  Pension  Funds    .    .  7,923,000.00 

Total  Rbceipts  from  All  Soubces,  viz.,  from  Taxes, 
Assessments,  Water  Rates,  and  Other  Revenues;  from 
Borrowings  by  Sales  of  Long-term  Bonds  and  Short- 
term  Notes,  excluding  all  Inter  Se  Transactions    .  $987,288,851.14 
Itt.  January  1,  W2&-<kusk  Balances  in  City  Treasury  and  Sinking 

Funds   35,265,604.88 

Total  Receipts  and  Openinq  Cash  Balance      .  $1,022,554,456.02 


ADDITIONAL  C^:iASSIFICATION  OF  THE  STATEMENT  SHOWINQ 

TIm  Totid  Pavments  by  the  City  during  1926,  aggregating  $982,371,347.61, 
gnnm  mto  the  foUowii^  g^eral  dassmcation: 

For  Personal  Service  .   $255,892,519.92 

For  Pensions  and  ReUef   15,078,892,78 

For  Taxes  and  Rents  .   I,549!l91.01 

For  Taxes  paid  to  State   17,564,808.49 

Payments  on  account  of  Contracts,  Open  Market  Orders, 
Judgments,  Claims,  Awards  for  Propwty  acquired  by  the 

aty  and  Sundry  Other     ....   215,120,851.00 

Beronding  of  Sundry  Receipts  consequent  upon  Overpay- 
ments, Adjustments,  etc   2,901,348.66 

Bedenqytion  of  Long-torm  Debt  and  Interest  on  Debt    .    .  71,187,735.75 

ToTAii  Paid  Oot  by  the  City  on  account  of  Current 
Expenses  of  the  City,  Outlays  lor  FBrmanent  Im- 

provements,  and  Debt  Service   $579,295,347.61 

Redemption  of  Temporary  Debt   403,076,000.00 

ItocAiiAMoiniT  Paid  OOTl^nnC^  dining  1926   .    ,  1962,371,347.61 


! 


Financial  ADioNismATiON:  Apfbnddc  A  253 

WHAT  THE  CITY  PAID  OUT  IN  1996 

Total  Disbursements  during  1926  for  account  of 
Current  Expenses  of  City  Government:  Interest 
and  Redemption  of  Debt;  Outlays  Unt  Permanoit 
ImmDvemcntB   1579,205^7.61 


Redemption  of  Temporary  Loans: 

Revenue  BOk  $249,350,000.00 

Special  Revenue  Bonds   25,276,000.00 

Corporate  Stock  Notes  (including  Renewals)  109,950,000.00 

Tax  Notes     ,   18,500,000.00  403,076,000.00 


Total  Payments  during  1926,  Exclusive  of  Inter 

Se  Transactions   $982,371,347.61 

DeoemberSl,  l(l2fk--GbEdi  Balances  in  City  Treasury  and  Sinking 

Emf^  »   40,183,108.41 


Total  Patmsmis  and  CiiOSiNa  Cash  BAUkNca  .    .  $1,022,554,456.02 


WHAT  THE  CITY  OF  NEW  YORK  PAID  OUT  IN  1926 

These  Payments  were  made  from  the  following  sources,  i.e.,  funds  or  accounts: 

Item  tne  1026  Tax  Budget  Appropriation  Aocouats  .    .    .  $306^671,854.27 

(These  included  $35,750,000  redemption  of  short-term 
obligations,  viz.,  special  revenue  bonds  and  tax 
not^.) 

From  1925  and  Prior  Years'  Budget  Appropriations  liquidat- 
ing Unpaid  Liabilities  of  these  Budgets   25,406,022.40 

From  Special  Revenue  Bond  Funds  (including  $9,220,631.30 

for  Board  of  Education)   29,381 ,990.54 

From  Corporate  Stock,  Tax  Note  and  Afwwmment  Funds    .  147,719,997.17 

From  Special  and  Trust  Funds   11,452,483.58 

From  Sinking  Funds  in  Redemption  of  Long-term  Bonds 

held     the  Public   2,412,999.65 

Fhmi  tne  General  Account — Redemption  of  Temporary 
Loans,  viz.,  Corporate  Stock  Notes,  Bevenue  Bilb  and 

Special  Revenue  Bonds   367,326,000.00 

$962,371,347.61 


254  New  Yobk  Citt's  Financss  and 

be  the  city  debt 

On  the  fifst  of  Januaiy,  1026.  the         Long-term  Debt,  con- 
sisting of  Corporate  Stoek  and  Serial  Boncb  (ezduding  General  -  ^ 

Fund  Bonds)  aggregated  *^'^If955'Ii5*iV 

During  the  Year  1926  we  redeemed   31,942,864.51 

$1,442,11(V86L59 

During  the  Year  we  iaraed  and  sold,  and  thereby  added  to  the  ^  »  ^ 

Loii-tenn  Debt   109,087,925.00 

BBaking  the  Total  Amoimt  Outstanding  as  at  December  31,  1926, 
of  Corporate  Stock,  Serial  Bonds,  and  Assessment  Bonds  Re- 
deemable  by  the  City  of  New  Yoik  $1,551,198,788.50 


BE  CORPORATE  STOCK  NOTES 

On  the  firet  of  January,  1926,  there  were  $91,950,000  of  corporate  stock  notes  out- 
standing. During  the  year  we  were  required  to  issue  $116,937,925  and  there  was 
taken  up  $99,092,925  by  the  sale  of  $75,000,000  of  corporate  stock  and  serial  bonds 
to  the  publie:  the  remainder  bang  taken  by  the  Sinking  Funds.  We  closed  the 
year  with  $109,795,000  of  corporate  stock  notes  outstanding,  which,  together  with 
additional  notes  sold  in  1927,  were  taken  up  by  the  bond  sales  of  January  6th  and 
May  11th,  1927. 


Financial  Administration:  Appendix  A  255 

RE  sinking  funds 

Of  the  City  Debt  ^;  .^1*264,953,497.65 

is  redeemable  by  the  Sinking  Funds;  the  remainder  is  redeemaUe  as 
it  matures  by  the  direet  approiniations  in  the  reeinning  annual 

tax  budgets.  .    ,  . ,  i.  xi. 

The  total  Amortization  Reserves  reauired  to  provide  for  the  re- 
demption of  the  bonds  redeemable  by  the  Sinkmg  Funds  amounted     „  ^ 
on  December  31, 1928,  to   268»033,62t73 

and  the  Total  Assets  held  by  the  Sinking  Funds,  consisting  of 
investments  in  New  York  City  bonds,  cash  in  the  City  deposi- 
tories, and  accrued  interest  (not  due)  on  investments,  amoimted 
^   297,285,o5o.v7 

the'Siiikine  Funds  therefore  showing  Surplus  Assets  of  over  all 

f^jr^i^im^*^  B«0wves  required  as  at  December  31,  1926.  $29,252,035.24 


I 


-4' 

M 


APPENDIX  B 
Geowth  of  New  Yobk  City's  Budget  1898-1927 

1888    177,473,084 

1880    93,520,082 

1900    90,778,972 

1901   98,10Q,413 

1902    98,619,600 

1903    97,119,031 

1904    106,674,956 

1905    109,817,693 

1906    116,805,490 

1907    130,412,605 

1908    143,572,266 

1909    156,545,148 

1910    163,128,270 

1911    173,967,836 

1912    181,090,266 

1913    192,711,441 

1914    192,995,551 

1915    198,989,786 

1916    212,956,177 

1917  211,115,016 

1918    238,662,514 

1919    248,026,434 

1920  •   273,689,485 

1921    345,571,899 

1922    350,601,570 

1923    353,350,975 

1924    375,468,000 

1925    399,618,885 

1926    437,000,000 

im   474,883,900 


Financial  ADMiNisraAfnoN:  Appendix  C 


257 


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III 


APPENDIX  E 


TXBIfB  AND  CoNDmONSy  BUDOOT  FOR  1927 

Resolved,  That  this,  the  Budget  of  The  City  of  New  York,  for  the 
year  1927,  as  hereby  made  in  pursuance  of  section  226  of  the  Greater 
New  York  Charter,  shall  be  administered  under  the  following  terms  and 
conditions,  to  be  changed  only  by  the  Board  id  Estimate  and  Ap- 
portionment: 

Changes  in  Schedules 

That  no  change  shall  be  made  by  any  Board  or  bead  d  an  Office, 

Bureau  or  Department  in  the  City  or  County  Governments  in  the 

personal  service  schedules  contained  in  this  Budget,  except  when  author- 
ized by  the  Board  of  Estimate  and  Apportionment. 

Modifications 

That  requests  for  modification  of  the  personal  service  schedules  may 
be  tnide  by  a  Board  or  head  of  an  Office,  Bureau  or  Department  to  the 

Board  of  Estimate  and  Apportionment  and  shall  be  effective  only  if 
and  in  so  far  as  approved  by  the  Board  of  Estimate  and  Apportion- 
ment. No  request  for  a  modification  of  personal  service  schedules 
shall  be  made  which  contemplates  the  use  of  moneys  already  accrued 
or  which  will  increase  the  monthly  or  other  pro  rata  rate  ci  expeor 
diture  from  this  Budget. 

Vacancies 

Tliat  vacancies  existing  on  Januaiy  1,  1927,  or  occurring  thereafter, 
in  the  personal  service  schedules  in  this  Budget  for  ''Salaries  R^;ular 
Employees,"  "Salaries  Temporary  Employees,"  "Wages  Regular  Em- 
ployees" or  "Wages  Temporary  Employees,"  may  be  filled  as  follows: 

1.  Positions  in  the  uniformed  forces  of  the  Department  of  Polioe, 
Fire  and  Street  Cleaning. 
Positions  in  the  Labor  Class  as  d^ned  in  civil  service  rules  and 
classifications. 

264 


Financial  Administration:  Appendix  E  265 


Positions  in  the  Exempt  Class  and  Unclassified. 

Automobile  Enginemen,  Auto  Truck  Drivers,  Foremen  (over 
Skilled  Trades)  and  Ambulance  Enginemen,  and  all  employees 
paid  at  a  per  diem  rate  or  weekly  rate.  Copyist  and  Recording 
Clerks  paid  at  the  rate  of  5  cents  a  foUo;  Gardeners,  Steam 
Roller  Engineers  and  Electricians;  and 

Positions  involving  the  actual  operation  of  machinery  or  mechani- 
cal plants. 

—may  be  filled  by  the  head  of  the  Board,  Office,  Bureau  or  Depart- 
ment in  his  discretion,  as  follows:  provided,  however,  that  in  depart- 
ments under  the  jurisdiction  of  the  Mayor,  his  permission  shall  first 
have  been  obtained: 

(a)  Positions  in  the  uniformed  forces  of  the  Departments  of  Police, 
Fire  and  Street  Cleaning,  and  in  the  Bureaus  of  Street  Cleaning  in  the 
Boroughs  of  Queens  and  Richmond  may  be  filled  at  the  rates  provided 
in  this  Budget  for  their  respective  entrance  grades; 

Provided  that  if  a  vacancy  occur  in  the  said  uniformed  forces  by  reason 
of  the  separation  from  such  service  of  an  individual  who  at  the  time  of 
such  separation  receives  more  than  the  entrance  grade  rate,  nothing 
in  this  resolution  shall  tend  to  prevent  the  reinstatement  of  such  indi- 
vidual at  the  rate  previously  received  by  him  or  at  any  other  rate  or  grade 
to  which  he  may  be  entitled  by  law  at  the  time  of  such  reinstatement. 

(b)  Positions  in  the  Exempt  Class  and  Unclassified  and  Automobile 
Enginemen,  Auto  Truck  Drivers,  Foremen  (over  Skilled  Trades), 
Ambulance  Enginemen,  positions  in  the  Labor  Class  as  defined  in  civil 
service  rules  and  classifications,  positions  of  Gardeners,  Electricians  and 
Steam  RoUer  Engineers;  all  employees  paid  at  a  per  diem  rate  or  weekly 
rate;  Copyists  and  Recording  Clerks  paid  at  the  rate  of  5  cents  a  foUo, 
and  positions  involving  the  actual  operation  of  machinery  or  mechani- 
cal plants  may  be  filled  at  the  prevailing  rates  <rf  wages  as  ascertained 
and  approved,  from  time  to  time,  by  the  Board  of  Estimate  and  Ap- 
portionment, or  at  the  schedule  line  rates. 

2.  Positions  recited  below  may  be  filled  at  not  exceeding  the  follow- 
ing rates,  in  the  discretion  of  the  head  of  the  Department  or  Board: 

[A  list  of  institutional  positions  is  omitted.] 

3  (a).  All  other  vacancies  may  be  filled  in  the  discretion  of  the 
Department  Head  at  one  of  the  following  rates;  the  particular  rate  in 
each  case  being  the  one  next  lower  than  the  schedule  line  rate  unless  the 
schedule  line  rate  is  one  of  the  rates  enumerated  below,  in  which  case 
the  vacan<7  may  be  filled  at  the  schedule  line  rate,  and  provided  that 


266 


New  York  City^s  Finances  and 


in  departments  under  the  jurisdiction  of  the  Mayor  the  approval  of  the 
Mayor  shall  first  have  been  obtained: 


Positions  Governed  by  the  Municipal 
Civil  Service  Rules 

Rates  of  Compensation 
(Witii  and  Without  Maintenance) 


Positions  Govenied  by  the  State 
Civil  Service  Rules 

Rates  of  Ccnnpensation 


$760  00 

960  00 
1,260  00 
1,560  00 
1,860  00 
2,160  00 
2,460  00 
2,760  00 
3,000  00 
3,500  00 
4,000  00 
4,500  00 
5,000  00 
5,500  00 
6,000  00 


1760  00 

901  00 
1,201  00 
1,501  00 
1,621  00 
1,801  00 
2,101  00 
2,401  00 
2,641  00 
2,701  00 
3,001  00 
3,500  00 
4,000  00 
4,500  00 
5,000  00 
5,500  00 
6,000  00 


The  following  positions  are  excepted  from  the  above  rates  and  may 
be  filled  at  the  minimum  rates  hereafter  specified: 

[A  brief  list  of  special  positions  is  omitted.] 

Vacancies  resulting  from  the  filling  of  a  position  in  the  manner  pie- 
scribed  in  this  paragraph  3  (a),  by  promotion  or  transfer,  may  be 
filled  at  the  schedule  line  rate  if  filled  by  promotion  or  transfer,  provided 
that  in  departments  under  the  jurisdiction  of  the  Mayor  the  approval 
of  the  Mayor  shall  first  have  been  obtained. 

(b)  Where  a  position  has  become  temporarily  vacant  by  reason  of 
leave  ol  absence,  without  pay,  granted  the  regular  incumbent,  such 
position  may  be  filled  temporarify  in  the  diseretiiHi  of  the  dqmrliiieiit 
head  in  accordance  with  the  rates  above  specified. 

(c)  In  special  cases  involving  a  modification  of  schedules,  and  in 
cases  of  new  positions  provided  in  this  Budget,  the  Board  of  Estimate 
and  Apportionment  may  grant  pennission  to  fill  {tositions  at  xates  vaiy- 
isg  from  the  above  rule. 


Financial  Adionibtbation:  Appendix  E  267 


Second— There  shall  be  credited  to  the  "Funds  for  Salary  and  Wage 
Accruals  to  Be  Expended  as  Provided  in  the  Budget  Resolutions" 
estabhshed  in  this  Budget  for  The  City  of  New  York  for  each  of  the 
five  counties  tiberein,  as  soon  as  practicable  after  the  expiration  of  each 
salary  or  wage  period,  the  accruals  during  such  period  of  ''Salaries 
Regular  Employees"  and  "Wages  finployees,"  but  these 

credits  shall  be  made  only  upon  the  mitoission  of  reports  thereon  by 
the  Comptroller  to  the  Board  of  Estunate  and  Apportionment,  pur- 
suant to  section  237  of  the  Greater  New  York  Charter. 

Third— appropriations  under  a  classification  other  than  "Per- 
sonal Service,"  to  any  Board,  Office,  Bureau  or  Department  of  the  City 
or  Ckiunty  Govenmients,  made  in  this  Budget,  are  subject  to  the  fol- 
lowing conditions: 

(a)  In  so  far  as  practicable,  all  ccmtracts  and  openmaiket  orders  for 
purchases  to  be  charged  against  such  appropriation  shall  be  based 
upon  specifications  which  are  definite  and  certain  as  to  character  and 
quahty,  and  which  conform  with  standard  specifications  for  the  various 
classes  of  supplies,  materials,  fuel  and  forage  ahready  approved  or  here- 
aft^  to  be  approved  by  this  Board. 

(b)  That,  in  80  far  as  such  standard  specifications  may  be  estab- 
lished by  this  Board,  the  Comptroller  at  tiie  time  of  certifying  to  the 
sufficiency  of  appropriations  out  of  which  such  contracts  are  to  be  paid, 
shall  also  certify  that  the  specifications  for  such  supplies  or  materials, 
fuel  or  forage  or  other  articles  for  which  standard  specifications  have 
been  prescribed,  are  in  conformance  with  such  standard  specifications. 

(c)  That  all  open  market  orders  issued  by  any  department  for  sup- 
plies and  materials  for  which  standard  specifications  shall  have  been 
prescribed,  shall  contain  a  description  of  the  goods  ordered,  cc»ifonning 
with  such  standard  iqiecifications. 

(d)  That  the  Comptroller  shall,  in  auditing  claims  for  goods  deliy- 
ered  on  open  market  orders,  determine,  through  inspection  or  otherwise, 
whether  the  goods  delivered  conform  to  such  standard  specifications. 

(e)  Before  advertising  for  proposals  for  work  to  be  performed  under 
contract  and  chargeable  to  the  1927  Budget,  where  the  cost  thereof  is 
estimated  to  be  one  thousand  dollars  ($1,000)  or  more,  the  proposed 
contract  and  qiedfications  shall  be  submitted  for  ai^roval  to  the 
Board  of  Estimate  and  Apportionment. 

Fourth— AW  departments  of  City  and  County  governments  for  whidi 
appropriations  for  food  supplies  have  been  made  in  the  Budget  for 
1927  shall  make  an  inventory  on  January  1,  1927,  to  determine  the 


268 


New  York  City's  Finances  and 


number  of  units  of  each  article  of  food  in  stock,  either  in  stores  or  in 
the  institution,  and  the  cost  value  thereof,  and  shall  thereafter  keep  an 
accurate  record  showing  the  cost  price  per  unit,  the  number  of  units 
purchasedy  and  the  total  cost  of  all  articles  of  food  purchased  in  each 
month;  that  such  departments  shall  keep  an  accurate  record  of  the 
quantities  of  food  supplies  consumed  by  patients  or  inmates,  such 
record,  wherever  practicable,  to  be  separate  and  distinct  from  the 
record  of  consumption  of  food  suppUes  by  employees  or  persons  other 
than  patients  and  inmates;  and  such  departments  shall  keep  an  ac- 
curate record  of  the  number  of  units  of  food  suppUeiB  and  the  cost 
thereof  consumed  hy  the  employees,  such  record,  wherever  practicable, 
to  be  entirely  distinct  from  the  record  of  food  consumption  by  patients 
and  inmates,  and  such  departments  are  directed  to  submit  to  the 
Comptroller,  at  the  first  of  each  quarter,  a  statement  on  Budget  ac- 
counting forms  to  be  submitted  by  the  Comptroller,  showing  the  stock 
on  hand  at  the  beginning  of  the  preceding  quarter,  the  number  of  units 
and  phce  per  unit  and  cost  amount  of  the  supplies  dehvered  to  the 
department  within  the  preceding  quarter,  the  number  of  units  and  cost 
amount  of  food  supplies  consumed  by  patients  or  inmates  within  ibe 
preceding  quarter,  the  number  of  units  and  cost  amount  of  food  sup- 
plies consumed  by  employees  within  the  preceding  quarter,  the  aggre- 
gate number  of  patient  or  inmate  days  within  the  preceding  quarter, 
the  aggregate  number  of  employee  days  within  the  preceding  quarter, 
the  average  daily  per  capita  of  food  supplies  consumed  by  patients  or 
inmates  and  employees,  shown  separately,  in  the  preceding  quarter, 
and  the  total  number  of  units  consumed  and  the  cost  thereof  within  the 
preceding  quarter,  the  stock  on  hand  at  the  end  of  the  quarter  and 
such  other  information  as  may  be  required  upon  the  Budget  accounting 
forms;  provided,  however,  that  this  condition  shall  not  apply  to  ad- 
ministrative departments  to  which  food  supply  appropriations  have  been 
made  to  be  used  in  payment  for  meals  of  employees  properly  entitled 
to  such  meals  by  reason  of  overtime  work. 
Fifik — Repavinff — 

All  i^qnopriations  herein  authorised  far  the  repaving  or  resurfacing 
of  streete  and  avenues  shall  be  expended  only  in  accoitiance  with 
schedules  sulnnitted  by  the  respective  Borough  Presidents  to  the  Board 
of  Estimate  and  Apportionment  for  approval  and  approved  by  said 
Board;  and  that  no  contract  shall  be  made  for  repaving  any  street  or 
avenue  unless  the  President  of  the  Borough  having  jurisdiction  sub- 
mits to  the  Comptroller  with  such  proposed  contract  evidence  showing 


Financial  Administration:  Appendix  E  269 


that  the  original  pavement  in  such  street  or  avenue  was  laid  at  the 
expense  of  the  abutting  property  owners  or  by  local  taxation  or  by  bond 
issues  paid  for  by  the  locality  prior  to  consolidation;  unless  the  Board 
of  Estimate  and  Apportionment  shall  otherwise  determine  upon  presen- 
tation of  the  facts  and  circumstances  affecting  each  such  street  or 
avenue;  and  further  that  the  cost  of  all  repaving  or  resurfacing  of  street 
railway  areas  in  connection  with  the  above  approved  work  shall  be 
certified  separately  to  the  Comptroller  on  the  contracts  for  or  cost  of 
such  work,  the  cost  of  such  repaving  or  resurfacing  of  street  railway 
areas  to  be  financed  by  the  issue  of  special  revenue  bonds  or  other 
certificates  of  indebtedness,  but  not  by  the  issue  of  tax  notes,  and  that 
the  President  of  each  Borough,  where  such  repaving  or  resurfacing  of 
street  railway  areas  is  done,  be  required  to  take  all  necessary  steps  to 
enforce  the  liability  of  the  railway  company  for  such  work. 

— ^Be  it  further  Resolved,  That  the  Secretary  of  this  Board  is  hereby 
directed  to  send  certified  copies  of  the  preceding  resolution  to  each 
Department,  Board,  Office  and  Bureau  of  the  City  and  County  Gov- 
emments. 

Fixation  of  Salaries  Pursuant  to  Section  66  of  the  City  Charter 

Resolved,  That  the  Board  <^  Estimate  and  Apportionmeut  hereby 
establishes  positions  and  grades  of  positions  or,  in  those  cases  which 

require  action  by  the  Board  of  Aldermen,  recommends  to  said  Board 
of  Aldermen  the  establishment  of  positions  or  grades  of  positions  as 
follows: 

Fird — That  the  positions  and  grades  of  positions  appearing  under 
the  classification  "  Personal  Service,"  and  entitled  Salaries  Regular  Em* 

ployees,''  in  appropriations  made  to  the  different  Boards,  Offices, 
Bureaus  and  Departments  of  the  City  and  County  Governments  in  the 
Budget  of  The  City  of  New  York  for  the  year  one  thousand  nine  hun- 
dred and  twenty-seven  be  established  in  the  different  Boards,  Offices, 
Bureaus  and  Departments  of  the  City  or  County  Governments  for  the 
number  of  incumbents  shown  in  said  Budget,  except  that  in  all  cases 
where  a  position  or  grade  of  position  has  previously  be^  estabMied 
for  an  unlimited  number  of  incumbents  or  for  a  number  of  incumbents 
greater  than  the  number  shown  in  said  Budget,  nothing  in  this  resolu- 
tion contained  shall  be  deemed  to  reduce  the  number  of  incumbents 
previously  authorized. 

Second — ^That  for  all  positions  which  appear  in  this  Budget  in  the 
appropriaticMis  provided  for  a  Board,  Office,  Bureau  or  Department, 


270        New  York  City's  Finances:  Appendix  E 


the  rates  shown  in  resolution  First  (2)  and  First  (3a)  of  the  Terms  and 
Conditions  Governing  the  Budget  for  1927  shall  be  established  for  an 
unlimited  number  of  ineumbents  in  the  req)ective  Board,  Office,  Bureau 
or  Department. 

Third — That  the  positions  and  grades  of  positioiu  appearing  in  the 
Budget  for  1927  under  the  classification  "Personal  Service,"  and  en- 
titled "Wages  Regular  Employees,"  "Salaries  Temporary  Employees,'* 
"Wages  Temporary  Employees"  and  "Fees  and  Commissions,"  in 
appn^riations  made  to  Hkb  different  BoardSi  Offices,  Bureaus  and 
Departments  of  the  City  or  County  Governments  in  the  Budget  ol 
The  City  of  New  York  for  the  year  <»ie  thousand  nine  hundred  and 
twentyH9even  be  established  in  the  different  Boards,  Offices,  Bureaus 
and  Departments  of  the  City  or  County  Governments. 

Fourth — Nothing  in  this  resolution  contained  shall  be  deemed  to 
nullify  or  abolish  any  position  or  grade  of  position  in  the  different 
Boards,  Offices,  Bureaus  and  Departments  of  the  City  or  County 
Ciovemments  which  has  been  previously  established,  but  which  does 
not  i^^ear  in  the  Budget  for  1927  in  "Salaries  Regular  Empk^yees," 
"Salaries  Temporary  Iknployees,"  "Wages  E^iular  Employees," 
'Wages  Temporary  Emplojrees"  and  "Fees  and  Cmnmissions,"  in 
appropriations  made  to  the  different  Boards,  Offices,  Bureaus  and 
Departments  of  the  City  or  County  Governments  in  the  Budget  of 
The  City  of  New  York  for  the  year  one  thousand  nine  hundred  and 
twenty-seven. 

Fifth — position  or  grade  of  position  estahlished  in  accordance 
with  the  four  preceding  resoluti<»is,  shall  be  eslaUished  at  the  rate 
and  for  the  number  of  incumb^ts  stated  in  said  resolutions,  irrespec- 
tive of  the  fact  whether  the  person  or  persons  appointed  to  or  occupy- 
ing such  positions  do  or  do  not  receive  maintenance. 


APPENDIX  F 


Mandatobt  Pobtions  of  tbb  Bin>GfiT 

In  1915  an  exhaustive  analysis  of  that  year's  budget  was  made  to 
discover  how  much  of  it  was  obligatory  on  the  city  authorities  and  how 
mudi  was  subject  to  their  discretion.^  On  the  basis  of  this  examination 
the  expenditure  requirements  ol  the,  budget  for  that  year  wne  divided 
into  four  dasses,  as  followB: 

I.  Mandatoiy  (Enet  amount  fixed  by  law)     .    .  $31^407,889.01  25.9 
IL  Reasonable  expense  mandatoiy  (ai^Moiniatkm 

must  be  reasonable)   7,492,794.28  5.6 

III.  Rate  mandatory   (Rate  fixed  by  state  law, 

though  total  is  discretionary)   7,579,289.51  5.7 

IV.  DiscietioDaiy   83,505,339.34  02.7 

Conditions  have  changed  somewhat  in  this  respect  since  1915.  The 

Home  Rule  Amendment  of  1923  and  the  Enabling  Act^  now  give  the  city 
authorities  some  powers  over  matters  which  were  formerly  controlled 
exclusively  by  the  State  Legislature.  The  home  rule  powers  do  not, 
however,  extend  to  county  affairs,  education,  public  utilities,  and  possir 
bly  pensions.  It  should  be  noted  also  that  in  many  instances  the  impro- 
priations are  now  in  excess  of  the  amount  required  by  law,  so  that  many 
of  f^e  mandatory  expenses  of  Class  II  and  Class  III  above  have  ceased 
to  be  important. 

1  This  was  prepared  by  ConmuBBUMier  of  Aooounts  WaUstein. 
*  Chapter  363,  Laws  of  1924. 


271 


APPENDIX  G 


WoEK  Pbogrammb  Budobt— -1914  EzmauNT 

In  1913,  by  way  of  experimwit,  the  appropriations  for  three  of  the 
bureaus  under  the  jurisdiction  <rf  the  B<HOU|*i  President  of  Bichmond 
were  made  in  terms  of  work  to  be  done  rather  than  men  to  be  hired 
and  suppUes  to  be  used.    Except  for  a  smaU  overhead  staff  for  which 

specific  provision  was  made,  the  three  bureaus  were  to  be  given  com- 
plete discretion  as  to  the  hiring  of  their  unskilled  force.  Allotments 
were  made  for  specific  types  of  work  and  the  year  was  divided  into 

quarters.  ,     ,     ,  xi.  ^ 

The  experiment  was  inconchisive  and  was  abandoned  the  next  year. 
The  Borough  President  who  had  sanctioned  the  innovation  died  during 

the  first  year. 

The  tables  on  the  pages  which  follow  are  reproduced  verbatun  from 
the  Budget  for  19U,  pp.  240-243.  They  indicate  the  manner  in  which 
it  was  attwpted  to  install  this  new  f onn  of  budgeting. 

AiiLOWANCES  Mads  cw  Cost  Data  BASiar— 

Besolved,  That  the  following  terms  and  conditions  shall  govern  the 
administration  of  the  cost  data  budget  and  supporting  schedules  for  the 

Bureau  of  Highways, .      1  ^       ,         .  j 

Bureau  of  Sewers,  [Office  of  tiie  President,  Bcoou^  of  Ridimond 

Bureau  of  Street  Cleaning,] 

for  the  year  1914.  .       ^  .  xu 

(1)  The  nature  of  aU  expenditures  shall  fall  withm  the  scope  of  the 
work  classification  cq^iecified  in  the  supporting  schedules. 

(2)  The  total  cost  allowance  shown  therein  for  any  quarter  shall 
not  be  exceeded  within  that  quarter. 

(3)  The  total  allowance  for  capital  investment  shall  not  be  exceeded 
during  the  year. 

At  the  end  of  each  quarter  of  the  year  there  shall  be  presented  to 
the  Board  of  Estimate  and  Apportionment,  and  to  the  Department  of 

272 


Financial  Administration:  Appendix  G  273 


Finance^  a  detailed  statement  of  all  the  operations  of  the  above  men- 
tioned bureaus  and  the  cost  thereof,  together  with  a  reconciliation 
schedule  showing  the  relation  between  total  costs  of  work  and  total 
esqioidituiesy  in  such  form  as  may  be  prescribed  by  the  Board.  SiLch 
reporiSf  when  made,  shall  show  separatdy  for  each  Hem  cost  (he  several 
demerde  (hat  make  up  the  Uem  cost,  including  labor,  vdUcukar  transporta- 
tion {hired  and  departmental) ,  foreman  supervision,  inspection,  adminis- 
trative supervision,  materials,  supplies,  equipment,  and  plant  charges. 
At  the  same  time  requests  for  modifications  of  the  remaining  schedules 
may  be  presented  for  consideration  and  action  of  the  Board,  hiU  no 
change  shaU  be  made  in  the  work  programme^  until  first  approved  by  the 
Board  of  Estimate  and  Apportionment. 

The  quarterly  reports  of  the  Bureau  of  Highways  shaU  show  in  detaU 
the  character  and  the  quantities  of  the  work  done  and  shaU  indude  the 
names  of  the  streets  and  the  quantities  of  work  performed  on  each  street. 

The  quarterly  reports  of  the  Bureau  of  Sewers  shall  give  the  location  of 
basins  and  sewers  cleaned;  and  the  character  and  quantities  of  work  per- 
fanned  for  each  location. 

The  quarterly  reports  for  the  Bureau  cf  Street  Cleaning  shall  contain 
the  character  and  quantities  work  done  and  dmU  indude  the  names  of 
the  streets  and  the  quantities  of  work  done  on  each  sibred. 

At  the  beginning  of  each  quarter  the  Bureau  of  Highways,  the  Bureau 
of  Sewers,  and  the  Bureau  of  Street  Cleaning  shall  furnish  to  the  Board  of 
Estimate  and  Apportionment  and  to  the  Department  of  Finance  schedules 
of  work  planned  for  the  succeeding  quarter. 

The  Board  shall  be  notified  in  advance  of  the  commencement  and 
cessation  for  all  r^^ular  woric  covered  by  the  supporting  sdiedules. 

The  quantity  of  any  item  of  woi^  performed  in  a  given  quarter  shall 
not  exceed  or  underrun  by  more  than  10  per  cent,  the  quantity  specified 
for  that  item  in  the  supporting  schedules,  without  advance  notification 
to  the  Board  of  Estimate  and  Apportionment. 

Be  it  further 

Resolved,  That  the  Board  of  Estimate  and  Apportionment  hereby 
recommends  to  the  Board  of  Aldermen,  in  acocmlance  with  Section  56 
of  the  Greater  New  York  Charter: 

That  the  positions  and  grades  of  positions  and  rates  of  compensation 

therefor  appearing  in  the  following  schedules  be  established  respectively 
in  the  Bureau  of  Highways,  Bureau  of  Sewers  and  Bureau  of  Street 
Cleaning,  Office  of  the  President  of  the  Borough  of  Richmond,  for  the 
number  of  incumbents  specified  therein. 


274 


New  Yobk  City's  Finances  and 


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S 

id 


S     eS    S  S  S 

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Financial  Administbation:  Appendix  G 


275 


8 


8 


o 

o 


?  1  8 

CO    •  • 


4.80 
375.00 
4.00 
2.50 
3.90 
24.75 
17.40 
21.00 

.06 
2.82 
8,064.00 
70.00 

737.55 

165.00 
325.00 
250.00 
43.50 

27,300.17 
110.70 
86.63 
1,500.00 

$44,764.23 

1,195.20 
975.00 
101.00 
47.50 
71  10 
225.25 
42.60 
579.00 
6,820.80 
4,630.00 
59.94 
57.18 
3,936.00 
6,930.00 
1,500.00 
912.45 
2,000.00 
1,485.00 
925.00 
750.00 
87.00 

13,350.00 
159.30 
183.37 
1,200.00 

$87,666.48 

1,200.00 
1,500.00 
105.00 
50.00 
75.00 
250.00 
60.00 
600.00 
8,526.00 
5,700.00 
60.00 
60.00 
12,000.00 
7,000.00 
1,500.00 
1,650.00 
2,000.00 
1,650.00 
1,250.00 
1,000.00 
150.00 

49,150.17 
270.00 
270.00 
3,000.00  j 

$146,726.17 

•  •  •  • 

.150 
.500 
.75 
.50 
.60 
.60 
2.03 
.015 
.12 
.040 
.04 

•  •  •  • 

.075 
.022 
.050 
.003 
1.25 
1.00 
1.50 

.158 
1.35 
1.35 

.40 

«  •  •  • 

700 
100 
100 
500 
100 
1,000 
4,200 
380,000 
500 
1,500 
300,000 

20,000 
75,000 
40,000 
550,000 
1,000 
1,000 
100 

311,077 
200 
200 
7,500 

•  •  •  • 

•  •  '44444            :4444444  444'^ 

'.  '.&&&&&  &^  o'-S  &  &'.&&&&&&&     &  &  &  & 

OQ  (C  m  QD  OQ  OQ  S  OQ  M  QQ  ^      CO  »3  CO  CO  CO  CO  CQ      00  CO  CO  CO 

-3 


New  Yobk  Citt'b  Finances  and 


o 
S 

s 

§  1 

.  J 

p 
o 

H 

n 

o 


O 

W 
Q 

O 


1-4 

b 

S 

a 


B  £ 


Plant 

AND 

Equipment 
Charges 

S   S  S 

:    :    :    :^  :S  :  :  :  :S 

•         •         •         •  ^3              •    .    •  • 

Materials 

AND 

Supplies 
Charges 

$0.80 
273.90 
472.50 

389.88 
48.40 
118.68 

Personal 
Service 
Charges 

$15.20 

990.42 
1,777.50 

209.10 
72.00 
2,805.00 

520.12 
2,151.60 

285.66 

Item 

Cost 

•  •  •  • 

•  •  •  • 

$16.00 
1,440.00 
2,250.00 

242.00 
72.00 
2,805.00 

910.00 
2,200.00 

460.00 

Aver. 
Cost 

CO 

3  o  iO  sa  Q  £2  Q  o  . 

Work 
Quan- 
tities 

•  •  •  • 

•  •  •  • 

400 
7,200 
3,000 
11,000 
16 

85,000 
130,000 
4,400 

o  » 

Sq.  yds. 
Sq.  yds. 
Sq.  yds. 

Sq.  yds. 
Sq.  yds. 
Sq.  yds. 
Miles 
Sq.  yds. 
Sq.  yds. 
Cu.  yds. 

3  S  c  2 
=3  '3  'S  2 


to  ^  a  a 
a  .3  -r  -c 

•S  O  .3  .3 
5       o3  oJ 


CO  ^  10  <D    00  e»  O 


Financial  Administration:  Appendix  G 


277 


8 


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278        New  Yobk  City's  Finances:  Appendix  G 


799TS  .  . 

y>l  A  TiTH     /~kE>     TT  T/~^  IT  TIT  A  'VCf 

,    .    •    CARE  OF  HIGHWAY o     •    .  . 

$171,704.17 

Tax  Levy  Allowance  .... 

$140,7Z0.17  140,/^.if 

Special  and  Trust  Fund  AUowanoe 

OK  ACQ  Dt\ 

BUREAU  OF  HIGHWAY8 

NUMBSR  OF 

Posnnnf ,  Bujoet  am  Wami  Basb 

1 

Superintendent,  $3,000  per  annum    .    .  . 

Tax  Levy 

1 

Chi^  Qeik,  $2,000  per  annmn  .... 

Tax  Levy 

1 

Senior  Qerk,  $1,320  per  annum  .... 

Tax  Levy 

1 

Staiogn^[)her  and  Typewriter,  $1,IS00  per 

Tax  Levy 

1 

Stenographer  and  Typewriter,  $800 per  annum 

Tax  Levy 

1 

Cashier,  $1,500  per  annum  

Tax  Levy 

1 

Assistant  Engineer,  $2,250  per  amram  .  . 

Tax  Levy 

1 

Res.  and  Rep.  Spee.  Fd., 

$1,200 

5 

InspectoiB,  $1,350,  $1,500,  $1,650  per  amram 

1 

Impeeftmr,  $1,350  per  annum  

Res.  and  Rep.  Spec.  Fd., 

$1,350 

1 

Res.  and  Rep.  Spec.  Fd., 

$1,650 

Unfimited 

Fmnan,  $3,  $3.25,  $3.50,  $3.75,  $4,  $4.26, 

$4.50  per  diem  

Unlimited 

Assistant  Foreman,  $3,  $3.25,  $3.50  per  diem 

Unlimited 

Laborers,  $2,  $2.25,  $2.50,  $2.75,  $3  per  diem 

Unlimited 

Steam  Roller  Engineers,  $4.50,  $4.75,  $5  per 

Unlimited 

Stokers,  $3,  $3.25,  $3.50  per  diem    .    .  . 

Unlimited 

Unlimited 

Horse  and  Vehicle,  with  DriTer,  $3,  $3.25, 

Unlimited 

Team  and  Vehicle  with  Driver,  $5,  $5.25, 

APPENDIX  H 


Financial  RsQUiBEiaBNTB  of  the  City  of  New  York  fob 

PeBMANBNT  iMPROVBIfBNlB  AS  OF  JaNUABT  2,  1927 

What  foUowB  Bummariies  the  pennaDent  improvements  projected  by 
the  various  departments  of  the  city  for  initiation  or  ocnnpletion  within 
the  next  ten  years,  and  shows  the  estimated  costs  of  these  projects.  It 
was  found  that  with  the  exception  of  the  Board  of  Water  Supply,  not 
one  of  the  city  departments  has  a  complete  ten  year  programme.  Only 
a  few  departments  have  plans  extending  beyond  a  single  year.  The 
reason  for  this  is  two-fold.  In  the  first  place,  due  to  the  city's  financial 
condition,  only  the  most  urgent  appropriations  are  made  and  the  de- 
partments, therefore,  plan  only  for  an  amount  in  dollars  which  they 
believe  they  have  some  chance  of  getting.  Secondly,  apart  from  the 
factor  of  replacements,  future  extensions  must  be  predicated  entirely  on 
the  growth  of  the  city  as  to  population,  area,  and  type  of  development 
and  the  difficulties  of  estimating  these  factors  discourage  the  depart- 
ment heads  from  making  forecasts. 

Under  the  "pay-as-you-go  policy,"*  public  improvements  are  financed 
f rron  Corporate  Stock,  Tax  Notes,  or  Assessment  Bonds.*  Wherever 
possible,  ilie  proposed  indebtedness  for  projected  improvements  has 
been  segregated  along  these  lines. 

The  following  summary  shows  the  requirements  of  the  departments 
completed,  the  figures  being  for  varying  periods  as  outlined  further  on  in 
this  roport: 

AaSBSSlfBHT 

Ooarcnun  GkrocK    amd  Tax  Nont 

Board  of  Transportation   $665,848,000   

Board  of  Water  Supply   347,034,000   

Board  of  Bducatten   143,291,490   

DeDartment  of  Docks    ........  20,175,000   

B^ar^t  of  Health   2,355,000  ^^^^ 

Street  Cleaning  (3  departments)   9,950,000  ^^'^ 

Fire  Department   •  •  •  •  ?*Sn*?oK 

Police  Department   ^J*nnn'nnn 

Assessment  projects     3S,WU,WW 

Total   $1,089,563,490  $52,789,694 

^See aboTe,  p.  28.        'See above,  p.  30, 

279 


280 


New  York  City's  Finances  and 


Figures  from  the  Department  of  Plant  and  StructureB  are  not  in- 
cluded. The  Chief  Engineer  reports  that  the  work  of  computing  the 
cost  of  future  requirements  is  now  definitely  under  way  but  that  it  will 
be  some  time  before  it  is  completed.  The  Tri-borough  Bridge  project 
and  the  East  River  Tunnel  are  the  most  important  and  most  costly 
improvements  this  department  has  under  consideration. 

The  following  departments,  which  are  not  touched  upon,  had  requests 
pending  as  of  January  1, 1927,  for  funds  as  shown: 

Pending  Requests 


Department  of  Public  Markets   $1,010,000 

Hunter  College   2,250,000 

Cdlege  of  the  Qty  of  New  Yoric   1,069,756 

DqMfftment  of  Public  Welfare   3,»82,000 

Bellevue  and  Allied  Hospitals   4,518,000 

Metropolitan  Museum  of  Art   125,000 

President,  Borough  of  Manhattan   4,245,000 

President,  Borough  of  Brooklyn   4,770,000 

President,  Borough  of  Bronx   9,186,000 

Presidmt,  Borough  of  Queens  (Other  than  Street  Gleaning)    .    .    .  2,370,000 

Fkcsidmt,  Borough  of  Richmond  (Other  than  Street  Qeaniiig)     .    .  1,639,000 

Department  of  Correction   1,925,000 

Department  of  Parks,  Manhattan                                               .  484,000 

Department  of  Parks,  Brooklyn   6,040,126 

Department  of  Parks,  Bronx   3,943,000 

Department  of  Parks,  Queens   3,922,001 

Departoient  of  Parks,  Richmond   120,000 

Quemis  Public  lilHaiy   500,000 

Aimoiy  Board   501,500 


Total  $62,650,384 


These  two  lists  include  all  departments  that  make  more  or  less  regular 
demands  upon  the  dty  treasury  for  public  improvements.  There  are  in 
addition  the  county  offices,  the  Museum  of  Natural  History,  and  the 
Zoological  Society  which  have  demands  at  infrequent  intervals  for  new 
structures. 

BOABD  OF  TrAKBPOBTAISDN 

The  Board  of  Transportation  operates  under  the  Bapid  Transit  Law. 
It  is  charged  with  the  duty  of  providing  for  the  construction  of  new 
subways  and  of  executing  the  obligations  of  the  city  under  Contracts 
3  and  4  with  the  existing  rapid  transit  companies.   The  Board  has 

estimated  its  capital  requirements  for  new  subways  (to  1936)  as  follows 
on  next  page. 


Financial  Administration:  Appendix  H  281 


ESTIMATE  OP  Money  Required  for  Present  Subway  Construction  Programme 

TO  BB  C0Mn«BTBD  BT  1931  AND  INCLUSIVE  OF  FUBTHEB  CAPITAL  KeQUI&EMENTS 

to  1936 

Cost  of  construction,  acquisition  of  real  estate  for  line,  yards,  shops, 
power  houses,  etc.,  recapture  of  existing  Culver  line,  equipment, 
including  rolling  stock,  power  plants,  signal  and  switching  sys- 
tsBOB,  etc.,  and  administiatbn  and  enginerauig  expense  .    .  $506,765,000 


Cost  of  capital  prior  to  initial  operatiiMi   76,015,000 

Cost  of  additional  equipment,  1932   10,095,000 

Cost  of  additional  equipment,  1933    17,217,000 

Cost  of  additional  equipment,  1934    17,217,000 

Cost  of  additional  equipment,  1935    26,473,000 

Cost  of  additional  equipment,  1936    32,066,000 


$685,848,000 

Amount  heretofore  appropriated,  approximately   120,000,000 


Estimated  amount  required  for  new  system  to  1936   $565,848,000 

BoAKD  OP  Water  Supply 

The  per  capita  consumption  of  water  in  the  various  boroughs  of  New 
York  City  during  1925  was  as  follows: 

Manhattan  and  Bronx   151  gallons 

Brooklyn   113  " 

Queens   129  " 

Richmond   102  " 

All  boroughs   136  " 


This  represents  an  increase  of  35  per  cent,  since  1916. 

The  total  consumption  of  water  in  New  York  City  from  1916-1925, 


inclusive,  is  shown  in  the  follawing  tabulation: 

• 

TJm  IS 

iMowiusB  IN  Usa 

Gaux>ns  DahiT 

OVWB.  1916 

1916  .... 

.    .    .  566,000,000 

1917  .... 

.    .    .  585,000,000 

19,000,000 

1918  .... 

.    .    .  650,000,000 

93,000,000 

1919  .... 

.    .    .  660,000,000 

94,000,000 

1920  .... 

.    .    .  735,000,000 

769,000,000 

1921  .... 

.    .    .  731,000,000 

165,000,000 

1922  .... 

.    .    .  743,000,000 

177,000,000 

1923  .... 

.    .    .  762,000,000 

196,000,000 

1924  .... 

.    .    .  786,000,000 

220,000,000 

1925  .... 

.    .    .  847,000,000 

281,000,000 

282  New  York  City'b  Fikancss  and 


The  total  safe  yield  of  ail  the  sources  wfaieh  now  supply  the  dty  m 
1,100  miUioii  gallons  daily.   This  figure  is  made  iq»  as  foUows: 

Galix>n8  Daily 

Catskill  system  induding  the  Bronx  and  Byram  rivers     ....  600,000,000 

Croton  system   336,000,000 

Ridgewood  system   90,000,000 

Borough  sources    ^0,000,000 

Fkiirate  wat»  oompanieB   44,000,000 


1,100,000,000 


Of  the  above  sources,  only  the  Bidgewood  may  be  developed  so  as  to 
produce  more  water.  A  complete  utilisatbn  of  the  ground  waters  of 
that  system  would  yield  about  30,000,000  gallons  duly  of  additional 

water,  but  among  the  supplies  furnished  by  the  borough  sources  and  the 
private  water  companies  are  some  that  are  too  hard  for  either  domestic  or 
industrial  use.  These  will  ultimately  be  abandoned.  The  complete 
development  of  the  Bidgewood  system  on  Long  Island  may  be  accom- 
plished whenever  necessity  requires.  The  quantity  of  additional  water 
which  can  thus  be  secured  is,  however,  so  small  as  not  to  have  a  bearing 
on  the  general  question  of  making  adequate  provision  for  future 
needs. 

During  1925,  the  city  used  water  at  the  average  rate  of  847,000,000 
gallons  per  day.  The  available  margin,  consequently,  was  1,100,000,000 
less  847,000,000  or  253,000,000  gallons  daily.  At  the  annual  rate  of 
increase  of  31,000,000  gallons  daily,  this  margin  or  reserve  will  meet  the 
requizements  for  about  eight  years.  It  is  proposed,  therefore,  to  develop 
a  supply  from  sources  east  of  the  Hudson  River  and  north  of  the  present 
Croton  watersheds,  at  an  estimated  cost  of  $347,934,000. 

This  total  expenditure  will  be  extended  over  a  period  of  about  15 
years,  and  the  annual  expenditures  will  be  approximately  as  follows: 

Summary  of  Requirements 


Fint  year  

,    .  $2,000,000 

Second  year  

.    .  6,000,000 

Third  year  

,    .  15,000,000 

Fourth  year  

.  35,000,000 

Fifth  year  

.    .  50,000,000 

Sixth  year  

.    .  45,000,000 

Seventh  year  

.    .  40,000,000 

Eighth  year  

.    .  30,000,000 

Ninth  year  

.    .  25,000,000 

Tenth  year  

.    .  20,000,000 

Eleventh  to  fifteenth  year  (annually) 

.    .  20,000,000 

Financial  Administration:  Appendix  H  283 


BoABD  OF  Education 

The  complexities  of  municipal  financing  problems  are  well  illustrated 
in  the  Department  of  Education.  Planning  in  advance  is  particularly 
important  in  providing  proper  school  facilities.  If  sites  for  new  schools 
aie  not  purchased  as  new  sections  are  opened,  the  city  may  find  it 
necessary  to  pay  increased  prices.  On  the  other  hand,  tiie  policy  of 
purchasing  in  advance  of  actual  need  ties  up  capital,  with  a  resultant 
loss  of  interest,  and  exempts  the  property  from  taxation  at  a  date 
earlier  than  necessary  with  a  resultant  loss  of  city  revenue.  Such 
policy  incurs  a  risk  that  the  property  m&y  prove  ultimately  to  be  un- 
suited  to  the  needs  of  the  situation  with  a  probable  loss  of  at  least  the 

costs  of  acquisition. 

The  Board  is  working  on  the  basis  of  a  three-year  development  pro- 
gramme. Tliis  is  recognized  as  being  somewhat  theoretical  for  the  reason 

that  each  year's  requirement  will  undoubtedly  be  pruned  to  meet  the 
exigencies  of  the  city's  financial  condition.  As  a  concrete  example,  the 
tabulation  below,  which  calls  for  upwards  of  $60,000,000  for  the  current 
year,  is  now  before  the  Board  of  Estimate  and  Apportionment,  but  is 
being  consideied  on  a  so-called  restricted  basis.  The  Board  of  Estimate 
and  Apportionment  is  considermg  $36,916,000  to  meet  immediate  re- 
quirements while  the  remainder,  although  still  before  the  Boaid,  will 
probably  be  eliminated. 

Sites  acquired  by  condemnation  proceedings  are  usually  not  imid 
for  until  several  years  after  their  acquisition.^  Thus  the  yearly  require- 
ments are  to  some  extent  obscured  by  the  necessity  of  making  back 
payments.  In  the  following  table  the  sum  of  $3,000,000  is  included  to 
cover  costs  of  sudi  past  acquudtions.  The  programme,  while  estimatmg 
the  annual  requnements  for  construction,  does  not  allocate  the  costs  of 
acquisition  of  sites  by  years  for  the  reason  that  there  is  no  way  of  telling 
when  actual  payments  must  be  made. 

A  further  complication  arises  from  the  fact  that  the  Board  has  sur- 
rendered school  buildings  in  Manhattan  to  the  Sinking  Fund  Commission 
and  will  continue  to  do  so  from  time  to  time  as  residential  sections  be- 
come converted  into  business  sections.  These  surrenders  of  valuable 
business  properties  constitute  a  credit  for  which  the  Board  <rf  Education 
receives  no  direct  allowance.  For  this  reason  no  att^pt  has  b%n 
made  to  measure  these  credits  in  the  programme. 

I  See  above,  p.  72  ff. 


284 


New  Yobk  Cmr's  Finangbs  and 


SUMMABT  OF  ThBEE-YeAR  PROGRAMME 


1927 


1928 


1929 


Situ 


Total 


ESementary  school, 
high  school  and 
special  school 
buildings 

InqHroTing  play- 
grounds    .  . 

Awards,  etc  . 

Pianos  and  organs 

Salaries  of  inspect- 
ors, draftsmen, 
etc  

Surveys,  borings, 
etc*  •    •    •  • 


$55,477,000 
1,825,000 
200,000 

2,578,725 
114,000 


$33,687,000 
1,000,000 
100,000 

1,560,915 
08,000 


$33,871,000 
525,000 
100,000 

1,510,920 
66,000 


$7,607,930 

3,obb)ooo 


$130,642,930 

3,350,000 

3,000,000 
400,000 


5,650,560 
248,000 


Total 


$60,194,725 


$36,415,915 


$36,072,920  $10,607,930 


$143,291,490 


Under  the  city's  present  fiscal  policy,  as  fixed  in  Section  169  of  the 
Charter,  the  cost  of  school  sites  and  buildings  is  payable  out  of  the 
I»ooeeds  of  Corporate  Stock. 

Depaktment  of  Docks 

Dock  building  is  financed  entirely  out  of  the  proceeds  of  Corporate 
Stock.  The  structures  generally  become  selfHSustaining  so  that  the 
courts  may  exclude  such  stock  from  the  operation  of  the  constitutional 

debt  limit.^  The  department,  however,  does  not  attempt  to  plan  ahead 
for  as  long  a  period  as  ten  years,  for  such  a  plan  would  be  highly  specula- 
tive in  so  far  as  the  later  years  of  the  period  are  concerned.  A  notable 
case  in  point  was  the  construction  of  the  Staten  Island  piers  which  cost 
the  dty  S30,000,000  and  which  are  now  idle.  This  project  was  urged 
by  shippers,  business  interests,  and  dty  officials.  Eyer3^ne  agreed  at 
the  time  that  the  Staten  Island  waterfront  was  in  line  for  development. 
Yet,  when  the  piers  were  completed,  conditions  had  changed  completely 
and  there  is  now  no  demand  whatever  for  these  expensive  piers. 

The  Department  has  a  four-year  building  programme  worked  out  for 
which  portions  of  the  funds  required  have  been  requested  to  begin  woik 
this  year.  In  addition  the  Chief  Engineer  has  estimated  what  he  be- 
lieves will  be  necessary  beyond  this  programme.   The  ooets  are  oon- 


^  See  bdow,  Ai^Nodix  O. 


FiNAKCIAL  ADMINlSraATION:  APPENDIX  H  285 

jecturaL   The  following  tabulation  shows  the  amounts  which  will  be 

needed:  ^ 

SuiOfABT  OF  RjBQUIBBiaNTB 

Pier  No.  3,  shed  and  wan   ^l»fS?'^ 

Pier  No.  34    2,125,000 

KerNo.38-42    200,000 

Her  No.  48  —  50  (2  piers)  

Piers  No.  9  and  10  (to  be  replaced  by  one)    .    .    .  1,000,000 

Gravesend  Bay  wall   , 

Pier  new  No.  32   1,850,000 

Fbur-year  building  programme  to  be  finanoed  in  three 

yean  $13,476,000 

Estimated  Furtheb  Improvements 

Produce  station  

Pier  new  No.  44  N.  R   I'^'^S 

Consolidation  of  ferries   ^Sn'lwCI 

New  England  Company  consoUdation      ....  l,fiOO,OOU 

Total   16,700,000 

SUMMABT 

Requirements  under  programme  $13,475,000 

Requirements  under  further  estimate   6,700,000 

Tot^  $20,175,000 

In  addition,  there  is  before  the  Department  the  general  question  of  the 
Jamaica  Bay  improvement  which  may  require  the  expenditure  of  large 
sums  of  money  within  the  next  ten  years.  The  Federal  Government  is 
making  substantial  appropriations  for  the  development  of  this  harbor. 
At  present  there  is  no  way  of  foretelling  just  what  the  future  financial 
lequirements  on  this  score  are  likely  to  be. 

Department  of  Health 

This  Department  differs  from  most  other  departments  in  that  its 
financial  requirements  for  some  years  to  come  have  to  do  entirely  with 
replacements.  There  are  pending  before  the  Board  of  Estimate  and 
Apportionment  requests  aggregating  $1,855,000  in  Corporate  Stock  for 
replacements  and  improvements  in  the  hospitals  under  the  jurisdiction 
of  this  department,  and  $2,560,000  in  Tax  Note  funds.  The  latter  item 
includes  $2,600,000  for  a  new  headquarters  building,  the  site  for  which 
is  already  availaWe.  If  the  total  of  $4,415,000  is  appropriated,  it  is 
estimated  that  the  addition  of  another  million  will  cover  all  requirements 
for  ten  years. 


286 


New  York  City^s  Finances  and 


SUMMABT  OF  REQUIREMENTS 

Corporate  Stock  $1,855,000 

Tax  Notes   $2,560,000 

Corporate  Stock  (future  estimate)  .    .  500,000 

Tax  Notes  (future  estimate) ....  500,000 

Total    12,355,000  13,060,000 

Depabtment  of  Stbbet  Clbamiko 

The  principal  problem  of  the  Department  of  Street  Cleaning  is  the 
sanitary  disposition  of  refuse.  Under  a  temporary  peimit  from  the 
War  Department,  the  bulk  of  the  garbage  horn  the  three  large  boroughs 
is  at  present  being  disposed  of  by  dumping  at  sea.  According  to  a 
report  prepared  by  the  Conmiissioner  of  Street  Cleaning,  the  Borough  of 
Queens  was  in  April,  1926,  disposing  of  68  per  cent,  of  its  garbage  and 
rubbish  by  incineration,  Richmond  58  per  cent.,  while  Manhattan,  The 
Bronx,  and  Brooklyn  were  disposing  of  only  22  per  cent,  in  this  manner. 

At  present  efforts  are  being  made  to  correct  this  unsatisfactory  situa- 
tion. Aside  from  the  financial  question,  the  problem  of  sites  for  in- 
cinerators is  troublesome.  It  is  generally  agreed  that  ineiDeraiion 
should  take  the  place  of  the  preset  methods  of  diiE^)osal,  but  the  growth 
of  the  city  has  reached  a  point  which  makes  it  difficult  to  choose  a  site. 
Every  proposal  results  in  a  storm  of  protest  which  sometimes  culminates 
in  successful  court  action  restraining  the  city  from  using  a  particular 
site  for  incinerators.  In  addition,  sites  are  much  more  costly  than  they 
would  have  been  had  they  been  purchased  years  ago  in  eonf oimiiy  with 
a  comprehensive  plan. 

In  his  report  of  April,  1926,  the  Conunissioner  stated  that  at  least  31 
incinerators  would  be  required  in  the  next  four  years.  At  that  time,  14 
plants  were  in  existence  so  that  17  more  were  needed.  He  recommended 
appropriations  totalling  $4,345,000  for  the  five  boroughs  to  acquire 
several  sites  in  addition  to  those  then  on  hand  and  to  construct  10  new 
incinerators.  This  appropriation  was  made  as  recommended  during 
1926. 

The  future  requirements  for  tiiis  purpose  are  grouped  here  regardless 
of  the  fact  that  the  appropriations  when  made  will  go  in  part  to  the 
Department  of  Street  Cleaning,  to  the  Borough  President  of  Queens, 
and  to  the  Borough  President  of  Bichmond.^ 

1  Sinee  1002  these  two  borough  prandents  have  had  jurisdiction  over  gariMige 
ooQection  and  disposal  in  their  lespeetive  bonra^  —  a  dtvirioii  iriiidi  onkM  a 
oiiified  plan  difficult. 


Financial  Adminisi»ation:  Appendix  H  287 


Sdioubt  of  RBQUxeiB  worn  1927 


Site  and  garage  building,  Bronx  . 
2  sites  and  2  garage  buildings,  Brooklyn 
Site  and  1  incinerator,  Bronx  .... 
Queens — 2  new  indneratora  .... 
Queens  site  and  new  garage  for  indneiator 
Queens  addition  of  unit  to  Arveme  incinerator 
Richmond  —  additional  land  for  incinerator 
Richmond  —  new  incinerator  unit 
Richmond  —  changes  in  2  existing  incinerators 
Richmond  service  building  at  incinerator 
Bichmond  section  house,  erection 
Bidunond  pavement,  etc.,  at  mcmextAoT 


C!oiiPOBATB  Stock 


$1,050,000 
790,000 

160,000 
25,000 

190,000 
75,000 
20,000 


Tax  Notm 

$157,500 
290,000 


100,000 


10,000 
0,300 


Total  $2,250,000  $566,800 


Further  lequiiements  to  complete  the  programme  are  estimated  as 
follows: 


2  additional  incinerators  in  Manhattan  $2,000,000 

2  sites  for  above  if  dty  land  not  avaOable   700,000 

4  additional  indnerators  in  Brooklyn     ......  4,000,000 

1  additional  incinerator,  Bronx   1,000,000 

Sites  lor  foregoing  6  indiimtoni  


Xotal  $9,950,000  $566,800 


FiBE  Department 

The  Fire  Department  requires  new  fire  houses  as  territories  are  devel- 
oped. A  further  continuing  requirement  of  this  Department  is  the 
extension  of  the  fire  alarm  telegraph  system  into  new  territories,  and  the 
occasional  puichase  of  fire  boats.  In  addition,  the  replacement  of  the 
overhead  fire  alarm  system  has  not  been  completed.  This  work  pro- 
gresses as  the  telephone  and  telegraph  companies  build  conduits  which 
are  shared  with  the  city. 

The  Department  has  pending  before  the  Board  of  Estimate  and 
Apportionment  requests  for  eight  sites  and  buildings  at  a  total  esti- 
mated cost  of  $600,000.  It  has  also  requested  $250,000  for  a  new  fire 
boat  and  $045,999.81  for  fiie  alann  tel^raph  installation  in  1927.  To 
complete  a  three  year  building  programme,  the  Department  estimates 
that  it  will  requure  a  further  sum  of  $1,952,000  for  26  buildings  and  14 
sites.  Under  the  present  fiscal  policy  of  the  city,  the  structural  require- 
ments of  this  Department  are  all  payable  out  of  the  proceeds  of  tax 
notes. 


288 


New  Yobk  City's  Finances  and 


SXJIQIABT  OF  RbQUISBMBNTB 

Pending  Tequesto  for  1027  imigiiniiiie — fire  houses  and  mtes    .    .  1600,000.00 

Pending  requests  for  new  fire  boat   SfiO^OOOiOO 

Estimated  additional  requirements  for  sites  and  buildings  to  oomplete 


a  three-year  programme   1,952,000.00 

Current  requirement  for  fire  alarm  telegraph  (two  years)  ....  945,999.81 
Estimated  requirements  for  five  years,  fire  alarm  telegraph    .    .    .  2,544,000.00 


Tbtel  w  16^1,000^1 


Police  Dspabimbnt 

On  January  1,  1927,  the  Police  Department  had  pending  requests 
bef(»e  the  Board  of  Estimate  and  Apportionment  for  $1,534,000  to 
cover  its  building  and  signal  agnEtom  requirements  for  the  current  year. 
The  Department  has  also  prepared  a  fiTe-year  programme,  beginning 
January  1,  1928,  which  is  given  below.  It  must  be  pointed  out  that 
this  compilation  does  not  include  any  estimate  of  the  future  cost  of 
further  extensions  of  the  traffic  signal  system.  This  will  undoubtedly 
require  large  sums  of  money. 

SUMMABT  OF  RXQUIBmaNTB  VOB  ScC  YkABB 

Tax  Hons 

13  proposed  new  station  houses  to  be  erected  in  the  boroughs  of  Man- 
hattan, Bronx,  Brooklyn,  Queens,  and  Richmond      ....  $1,000,000.00 

For  the  extension  of  the  traffic  light  signal  systems  in  Manhattan, 

Bronx,  Brooklyn,  and  Queens   534,000.00 


Total  1027  $1^000.00 

Tentative  schedule  of  the  requirements  of  the  Pohce  Department  for 
the  next  five  years  insofar  as  they  relate  to  new  precinct  station 
houses  and  rejdacements  of  old  station  liouses,  and  to  new  launches 
and  replaeemoits  of  old  launehes. 
Bmou^  of  Manhattan  —  3  new  station  houses  to  rqilaoe  i»eseat 


ones   $560,000.00 

Borough  of  the  Bronx  —  2  new  station  houses  .......  320,000.00 

1  new  station  house  to  replace  present  one   160,000.00 

Borough  of  Brooklyn  —  5  new  station  houses  to  replace  present  ones  875,000.00 

Borough  of  Quems  —  2  new  station  houses   300,000.00 

Borough  dt  Biehmond  —  1  new  station  house   150,000.00 

1  new  station  house  to  replace  present  one   150,000.00 

Training,  stable  site,  and  building   150,000.00 

Police  Academy  —  site  and  building   300,000.00 

Launches  —  six  replacements,  estimated  cost   70,000.00 

Launches  —  six  additional,  estimated  cost   70,000.00 


Total  $3,105,000.00 


FiNANGiAL  Administration:  Appendix  H  289 


TrntMOEAFSL  BUBBAU 

For  increase  of  underground  cable  capadty  and  the  replacement  of 

womout  cables  in  aU  boroughs   221,705.79 

Total  requirements  for  five  years  begmning  Januaiy  1,  1928  .  3,326,795.79 
Bieqnbenents  for  1927    1,534,000.00 

Total  $4,860,796.79 

Assessment  Funds 

The  city  requires  a  large  working  fund  for  the  various  types  of  assess- 
ment work  which  it  performs.  These  include  the  Street  Lnprovement 
Fund  and  the  Street  and  Park  Opening  Fund.  These  funds  now  aggre- 
gate about  $62,000,000.  About  $30,000,000  is  required  annually  with  a 
three-year  turnover,  but  this  period  is  lengthening  and  the  demands  on 
the  funds  are  oonsequently  increasing.  The  demands  are  likely  to 
grow  for  the  proMem  of  aekeatific  sewage  dii^KMal  is  being  met  by  assess- 
ment and  much  remains  to  be  done  in  this  dicBction.  Hie  Chief  Engineer 
of  the  Board  of  Estimate  and  Apportionment  estimates  ihai  the  funds 
should  be  increased  to  about  $100,000,000,  so  that  an  additional  $38,- 
000,000  could  be  provided. 


APPENDIX  I 


Digest  of  Official  and  Unofficial  Recommendations  Relatinq 
TO  THE  Budgetary  Pbocedubb  of  New  Yobk  Citt 

New  York  City's  budget  content  and  financial  machinery  have  fre- 
quently been  considered  by  legislative  and  unofficial  citizens'  com- 
mittees. Various  improvements  have  fnm  time  to  time  been  urged  by 
these  committees  and  by  municipal  research  organizations.  Typical 
inquiries  and  recommendations^  have  been  the  following: 

R.  Fulton  Cutting,  Next  Step  in  the  Development  of  Budget  Proeedvm 
(Bureau  of  Municipal  Research,  Decemb^,  1914,  141  pp.)- 
Recommends  (after  full  discussion) :  . 

1.  That  the  "budget"  carry  with  it  smnmaiies  showing  in  brief  form 
the  financial  programme  for  the  following  year;  a  ''work-programme" 
to  indicate  what  "public  service"  and  "public improvements"  are  to  be 
undertaken;  a  plan  for  "revenue"  raising  and  "borrowing";  a  balance 
sheet,  and  fund  and  debt  statements;  an  appropriation  ordinance,  in 
proper  form,  with  the  terms  and  conditions  attached.  Supporting 
data  are  needed  to  show  what  the  Board  of  Estimate  proposes  as  a  work 
programme  for  the  following  year. 

2.  That  the  form  of  appropriation  ordinanoe  be  modified  so  as  to 
provide  for  the  exercise  of  more  effective  control  over  expenditures, 
and  at  the  same  time  to  leave  to  executive  officers  opportunity  to  use 
business  discretion  in  management. 

William  A.  Prendergast  (then  City  Comptroller),  "  Financial  Administra- 
tion, Budget  and  Tax  Rate, "  Proceedings  af  the  Academy  of  PoUtical 
Science,  April,  1915  (pp.  155-159) : 

"The  difference  between  our  budget  and  ot^r  budgets  consists  in 
this,  that  while  we  present  a  statement  of  our  anticipated  city  expendi- 
tures, we  do  not  accompany  it  with  any  general  statement  of  the  sources 
of  revenue.  .  .  .  We  are  now  facing  a  situation  which  will  require  such  a 
statement." 

>  Reoommendations  wiiieii  mn  obeolete  (beoinw  of  dtaotn  in  budgetaiy  pio- 
oeduie)  aie  omitted. 

290 


Financial  Administration:  Appendix  I  291 


Report  of  Joint  Legislative  Committee  for  the  Investigation  of  the  Finances 
of  the  City  of  New  York.  Submitted,  February  7,  1916.  The  report 
is  signed  by  Elon  R.  Brown,  George  Cromwell,  Charles  W.  Wicks, 
Charles  C.  Lockwood,  Robert  F.  Wagner,  Thomas  H.  CuUen,  William 
J.  Moier,  Walter  W.  Law,  Jr.,  H.  E.  H.  Brenton,  Nathan  D.  Perlman, 
Nathan  D.  Shapiro. 

The  committee  condemned  the  practice  of  keeping  large  quantities 
of  short-term  paper  on  the  market.  In  order  to  make  this  unnecessary, 
it  presented  a  bUl  making  tax  collections  take  place  on  Januaiy  1,  and 
Julyl. 

Frederick  A.  Cleveland,  Some  Results  and  Limitations  of  Central  Financdtd 
Control:  Nine  Years'  Experience  in  New  York  City  (Bureau  of  Munici- 
pal Research,  January,  1917,  63  pp.)* 

Discusses  defects  in  method  of  preparing  annual  appropriation  bill 
(1)  brings  into  review  only  part  of  city's  activities  and  requirements; 
only  40  per  cent,  of  total  expenditures  made  subject  of  scrutiny;  entire 
bill  carries  only  80  per  cent,  of  all  authorizations;  (2)  preparation  of 
budget  put  into  hands  of  staffs  of  Board  of  Estimate  instead  of  requiring 
executive  officers  to  prepare,  subnut,  explain,  and  defend  proposals; 
thwarts  efforts  to  force  the  executive  to  plan  and  render  strict  account  of 
activities;  (3)  initiative  is  taken  by  an  irresponsible  staff  of  a  central 
board,  the  conclusions  reached  are  arbitrary,  and  the  method  of  contiol 
is  one  of  minute  limitations  and  restrictions  on  management  instead  of 
critical  review  .  .  .  with  provisions  for  enforcing  strict  accountability 
as  to  manner  in  which  public  money  is  expended.  The  true  budget 
process  wholly  reversed.  The  reviewing  board  becomes  the  proposer. 
Limitations  and  restrictions  cannot  take  place  of  careful  planning. 
There  should  be  a  definite  work  programme  as  well  as  a  plan  for  financing. 

Arnold  W.  Lahee,  New  York  City  Budget^  (Bureau  o£  Mumcqsal  Re- 
search, 1917, 154  pp.). 

''It  is  reasonable  to  suggest  that  the  Board  of  Aldermen  be  given  at 
least  some  critical  power  over  tibe  Imdget  or  that  the  present  farce  be 
abandoned." 

Strictly  viewed.  New  York  City's  budget  is  no  budget  at  afl.   It  is  a 

highly  itemized  act  of  appropriations.  A  true  budget  should  contain 
retrospect  pictures  of  present  conditions  and  a  forecast  of  finances  on  a 
balance  sheet  basis. 

John  F.  Htlan,  Testimony  h^ore  Joint  Legislative  CommiUtee  on  Taxch 

Hon  and  Retrenchment,        (79  pp.,  typewritten). 

''We  believe  that  everything  should  be  put  in  one  conunon  fund  and 
disbursed." 


292 


Nsw  YoBK  Czzr!s  FunAxcm  AtiD 


It  is  better  to  adopt  the  budget  prior  to  electicm;  otherwiie  the 
iQeoeeding  admmistnilioB  m  f^pontkm  might  be  embamuBed 
by  insufficient  appropriations,  or  if  a&  admimBtration  of  1i»  same 
party  is  elected,  it  mi|^t  favor  itself  with  a  too  liberal  appropria- 

tion. 

The  present  budget  is  no  more  than  detailed  act  of  appropriation;  it 
is  only  an  expenditure  programme;  it  does  not  attempt  to  balance 
estimated  expenditures  against  expected  revenues. 

llie  budget  does  not  contain  all  of  the  proposed  expraiditures  for 
current  purposes.  Certain  expenses  aie  paid  out  of  the  levNiues  of 
individual  departments.  It  does  not  contain  all  proposed  expenditures 
and  payments,  such  as  for  water  supply,  bridge  maintenance,  debt 
service  and  pensions. 

Report  of  Joint  Legislative  Committee  to  Investigate  Administration  of  the 
City  of  New  York,  1921-22.  (No.  107,  288. pp.).  Schuyler  M. 
Meyer,  Chairman;  Elon  R.  Brown,  counsel. 

First  report.  Proposes  that  executive  or  spending  power  of  city  be 
separated  from  appropriating,  recommending: 

A  Board  of  Finance  of  nine  manbera  elected  at  large  fcnr  six  years, 

three  to  be  elected  every  other  year;  three  to  live  in  Manhattan,  three  in 
Brooklyn,  and  one  in  each  other  borough;  that  the  Board  of  Estimate 
and  Apportionment  and  the  Sinking  Fund  Conunission  be  aboHshed 
and  their  powers  transferred  to  the  Board  of  Finance;  that  the  Board,  on 
recommendation  of  the  Mayor  or  on  its  own  motion,  have  the  power  to 
abolish,  modify  or  consolidate  tlie  various  departments  of  the  dty;  that 
tiie  Board  have  power  of  confirmation  over  appointments  to  the  Board  of 
Taxes  and  Assessments  whose  tenure  of  office  is  to  be  the  same  as  for 
members  of  the  Board  of  Education;  that  the  Board  of  Finance  have 
power  to  remove  city  officers  for  cause  by  a  two-thirds  vote;  that  the 
Mayor  transmit  a  budget  for  the  support  of  the  entire  dty  and  county 
governments  to  the  Board  of  Finance,  and  have  the  power  of  veto, 
subject  to  being  overriddra  by  a  two-thivds  vote;  that  the  office  of 
President  of  the  Board  of  Aldermen  be  abolished,  and  that  the  Bo«rd 
choose  its  own  presiding  officer;  that  all  mandatory  legislation  fixing 
charges  on  city  or  counties  for  services  of  purely  local  nature  be  repealed 
and  that  such  further  legislation  be  restrained  by  constitutional  amend- 
ment; that  the  Mayor,  Comptroller,  and  Borough  Presidents  retain 
theur  executive  and  administrative  powm  unimpaired^  The  mioooiy 
report  disagreed. 


Financial  Administration:  Appendix  I  293 


Report  of  the  New  York  Charter  Commission^  with  a  Draft  of  a  Charter  for 
the  City  of  New  York,  1923.  (The  members  of  the  Commission  were: 
Henry  De  Forrest  Baldwin,  Howard  Lee  McBain,  Joseph  M.  Levine, 
J.  J.  Keller,  George  Cromwell,  Herman  A.  Metz,  Arthur  S.  Somers, 
Edward  M.  Bassett,  H.  Pushae  Williams,  Louis  L.  Delafield,  William 
Barclay  Parsons. 

The  Commission's  draft  charter  proposed  (Sec.  31)  the  appointment 
by  the  Board  of  Estimate  of  a  Commissioner  of  the  Budget,  who  should 
be  charged  with  the  duty  of  preparing  the  proposed  annual  budget; 
''and  for  that  purpose  every  bcMUxi,  department,  and  commission  of  the 
City  and  of  each  of  the  counties  therein  and  every  officer  not  subject  to 
any  board,  department,  or  commission,  and  also  the  Board  of  Education, 
from  time  to  time  as  the  Commissioner  of  the  Budget  may  require,  shall 
furnish  to  the  Commissioner  all  such  reports,  statements,  and  estimates 
as  to  actual  and  estimated  expenditures  and  revenue  of  its  or  his  office, 
board,  department  or  commission  and  all  other  information  pertinent  to 
the  actual  or  probable  requirements  of  approfniationa  therefor  as  the 
Commissioner  may  request." 

The  draft  charter  contained  detailed  proviaons  seeking  to  make  New 
York's  budget  a  full  statement  of  receipts  and  expenditures. 

The  Comptroller  is  required  to  transmit  to  the  Conunissioner  of  the 
Budget  before  September  15  a  statement  setting  forth  in  detail: 

"  1.  Tax  limit.  A  computation  of  the  amount  which,  in  conformity 
with  the  provisions  of  the  State  Constitution  and  of  this  Act,  the  City 
shall  then  be  empowered  to  raise  by  taxation  for  the  ensuing  year  and 
such  estimate,  as  he  may  be  able  to  make,  of  the  amount  it  will  be  em- 
powered to  raise  as  of  the  third  day  of  March  of  the  ensuing  year,  in  each 
case,  distinguishing  between  the  amount  which  must  be  comprised  in  the 
constitutional  limitation  of  a  percentage  of  the  assessed  valuation  of 
real  and  personal  estate  and  amounts  which  may  be  raised  in  excess 
thereof. 

"2.  Debt-incurring  power  within  debt  limit.  An  estimate,  as  of  the 
third  day  of  March  of  the  ensuing  year,  of  the  amount,  if  any,  for  which 
the  City  consistently  with  the  provisions  of  the  Constitution  and  of  this 
Act,  may  incur  further  indebtedness,  otherwise  than  by  the  issue  of 
revenue  and  Special  Revenue  Bonds  and  Tax  Notes,  which  shall  include 
a  statement  of  the  City's  power  in  this  respect  as  of  the  last  date  for 
which  accurate  or  approximately  accurate  figures  are  available. 

"3.  Bevenues.  An  estimate  of  the  revenues  of  the  City  for  the 
ensuing  year,  frcmi  any  and  every  source  whatsoever  and  of  every  office, 
department,  conunission  or  otlmr  body  and  of  eyer^r  fund  under  its 
ccmtrol  or  to  a  beneficial  interest  in  which  the  City  is  entitled,  other 
than  revenue  from  taxes,  including  the  estimated  receipts  of  the  General 
Fund  Ua  the  Reduction  of  Taxation  or  such  fund  or  account  of  like 


294 


New  York  City's  Finances:  Appendix  I 


nature  as  shall  be  maintained  and  including  also  the  estimated  receipts 
of  the  several  sinking  funds.  In  his  statement  the  Comptroller  shall 
set  forth  in  parallel  columns  (a)  the  items  of  accrued  and  estimated 
revenue  of  the  current  year  and  (b)  the  items  of  estimated  revenue  of  the 
ensuing  year. 

"4.  Expenditures.  An  itemized  computation  of  the  known  and 
estimated  amounts  which  the  City  will  be  required  to  expend  during 
the  ensuing  year  for  all  and  every  of  the  purposes  enumerated  in  Sub- 
divisions 1,  2,  7  and  8,  of  Section  141  and  of  all  other  amounts  which  it 
will  be  required  so  to  expend  by  reason  of  any  law,  contract,  the  judg- 
ment of  any  court  or,  in  reasonable  probability,  under  like  compulsion. 
In  such  computation,  iJlowance  shall  be  made  for  any  amounts  of  matur- 
ing indebtedness,  the  refunding  of  which  the  Comptrolkr  may  recom- 
mend, the  items  whereof  shall  be  specified/' 

The  budget  prepared  by  the  Conmiissioner  of  the  Budget  shall  exhibit 
in  parallel  columns: 

"(a)  tiie  items  and  amounts  appropriated  by  the  Budget  for  the 
current  year,  (b)  the  departmental  estimates  for  the  ensuing  year  and 
(c)  the  items  and  amounts  of  the  proposed  appropriations  for  the  ensuing 
year.  The  proposed  Budget  shall  also  exhibit  in  parallel  columns:  (a) 
aU  items  of  accrued  and  estimated  revenues  of  the  current  year,  to  the  control 
or  benefit  of  which  the  City  may  he  entitledXh)  the  items  of  revenues  as  esti- 
mated by  him  for  the  ensuing  year,  and  (c)  the  departmental  estimates  of 
revenues  for  the  ensuing  year.  With  such  proposed  Budget,  the  Com- 
missioner of  the  Budget  shall  transmit  one  original  of  each  of  the  depart- 
mental estimates  and  one  original  of  the  Comptroller's  statement  above 
provided  for."    (Sec.  139). 


APPENDIX  J 


Cash  Receipts  of  the  City  op  New  York  fob  the  Ybabs 
1915,  1918,  1921,  1924,  1925,  1926 


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APPENDIX  K 

DmukiLED  CuussmcAiiON  ov  SouscBS  OF  BscfiiFiB  OF  Nsw  YOBK  CiTT 

I.  General  taxes 

A.  Real  estate 

B.  Special  fianchiae 

C.  Personal  property 

II.  Special  taxes 

A.  Bank  and  moneyed  capital 

B.  City's  share  from  state 

1.  Income  (personal) 

2.  Mortgage 

3.  Corporation  (income) 

4.  Real  estate  brokers  and  salesmen 

5.  Motor  vehicles 

m.  lioenaes,  pennits,  privileges,  etc 
A,  lioenses 

1.  licenses  to  engage  in  the  business  of  trading  in  com- 
modities 
a.  Auctioneer 

6.  Fann  and  maifcet  produce  dealer 
c  Ice  dealer 

d.  Open  air  marioety  push  cart 

e.  Peddler: 

Carrying  merdiandiae 
Horse  and  wagon 
Push  cart 
/.  Junk  dealer: 

Horse  drawn  cart 
Push  cart  dealer 
Junk  boat 
Junk  shop 

g.  Pawnbroker 

h.  Second  hand  dealer 

i.  Stand: 

Elevated  railroad  stand 
Newspaper  kiosk  and  small  stand 
Stoop  stand 
Miscellaneous 
306 


Financial  Administbation:  Appendix  K  309 


%  licenses  to  engage  in  the  busmesB  of  rendering  specified 

services 
a.  Employment  agencies 
(.  MaasAge  parlor 

c.  Massage  operator 

d.  Hoist 

e.  Electrician 

/.  Public  porter 

g.  Runner  for  hotel  or  steamship 

h.  Caddy 

i.  Stand,  bootblack  diair 

8.  Licenses  to  exhibit  or  operate  shows  and  entertain- 
ments, or  to  own  such  places 

a.  Common  show 

b.  Motion  picUire: 

Motion  picture  exhibition 

Motion  picture  theatre 

Open  air  motion  picture  theatre 

c.  Theatrical 

d.  Concert 

e.  Manager  of  charity  entertainment 
/.  Itinerant  musician 

g.  Hand  organ 

4.  Licenses  to  own  or  operate  other  places  of  amusement, 
recreation,  etc. 

a.  Bowling  alley 

6.  Billiard  and  pool  table 

c.  Shooting  gallery 

d.  Bathing  establishment 

e.  Dancing: 

Public  dance 
Public  dance  hall 
Public  dance  serial 

5.  Licenses  to  own  or  drive  vehicles 

a.  Duii  cart 
6.  Express 

c.  Express  driver 

d.  Express  agent 

e.  Public  cai^: 

Horse 
Motor 
/.  Public  hack  driver 

g.  Stage  coach 

h.  Public  cab 

i.  Sightseeing  car 
j.  Little  taxicab 


310  New  Yobk  City's  Finances  and 

6.  Police  licenses 

7.  Pistol  licenses  (city's  share  horn  state) 

B*  Permits 

1.  Permits  to  erect  and  constract  above  the  surface 

a.  Illuminated  signs 

b.  Sign  structures 

c.  Temporary  sheds 

d.  Road  crossings 

2.  Permits  to  construct  below  the  surface 

a.  Street  vaults 

b.  Pipe  crossings 

3.  Permits  to  make  installatkos,  connections,  and  attach- 
ments 

a.  Sewers  and  drains 

b.  Tapping 

4.  Dumping  permits 

5.  Permits  for  minor  flpedal  uses  of  city  property 

C.  Privileges  and  concessions 

1.  Privileges  to  maintain  overhead  or  underground 
structures 

a.  Bridges  connecting  buildings 

5.  Minor  tunnels 

c.  Pipe  lines  and  conduits 

d.  Catenary  bridges 

e.  Poles  and  wires 

2.  Privileges  to  use  government  property  other  than  as 

tenant 

a.  Park  privileges  and  concessions 

6.  Ferry  privileges 

c.  Bridge  privileges 

d.  Renting  chairs  and  ponies  at  Coney  Island 

e.  Telephone  booths  in  public  buildings 

/.  Newspaper,  bootblack,  and  fruit  stands,  and 
lunch  counters 

g.  Wei^iing  scales  in  comfort  stations,  and  platform 
scales  in  streets 

h.  Railroad  station  platforms  on  city  property 
t.  Institutional  boat  at  dodc 

j.  Filling  in  privileges 

k.  Scow  trinuning  privileges 

L  Use  of  ground  at  Plum  Island 


Financial  Administbation:  Appendix  K  311 


IV.  Assessments 

A,  Local  public  unprovements 

1.  Sewers,  grading,  paving 

2.  Acquiring  title  to  properties  for  streets  and  parks 

B,  Specific  —  for  labor  and  materials  furnished  by  city 

1.  Restoring  pavements  (Charter,  Section  391.) 

2.  Reimbursements 

a.  From  railroad  companies  for  repairing  and  lepav- 
ing  within  railroad  area 

b.  "Permits" 

c.  "Excess  bills" 

d.  Surveys  of  unsafe  buildings 

e.  Tax  sale  expenses 

/.  Construction  of  private  sewers 
g.  Planting  trees  in  city  streets 

V.  Fines  and  forfeiture 

A.  Fines 

1.  Fines  imposed  by  courts 

a.  Collected  by  Children's  Courts 

b.  Collected  by  Magistrate's  Courts 

c.  Collected  by  Court  of  Special  Sessions 

d.  Collected  by  Court  of  General  Sessions 

e.  Collected  by  City  Court 
/.  Collected  by  Sheriff 

g.  Collected  by  County  Clerk 

2.  Fines  imposed  by  departments 

a.  Collected  by  Commissioner  of  Jurors 

b.  Collected  by  Police  Department 

c.  Collected  by  Bureau  of  Penalties 

3.  Fines  imposed  by  institutions 

a.  Collected  by  New  York  Penitentiaiy 

b.  Collected  by  district  prison 

c.  Collected  by  city  prisons 

d.  Collected  by  workhouse 

B.  Forfeitures 

a.  Forfeited  recognizances  and  bail 

b.  Forfeited  deposits  on  tax  sales 

c.  Forfeited  deposits  on  specifications  and  forms 

d.  Forfeited  deposits  on  contracts 

e.  Forfeited  deposits  to  cover  costs  of  testing  auto 
tires 

/.  Forfeited  security  deposits 

g.  Unclaimed  deposits 

h.  Uncollected  jury 
t.  (M  bank  balances 


312  Nxw  YoBK  Cnnr's  Finangbs  and 

VI.  SabventloDS  and  donations 

A.  State  contributions:  school  mone]^^ 

a.  Apportionment  under  laws  of  1920,  Chapters  165, 
680 

6.  Apportionment  of  Smith-Hughes  fund 

c.  Maintenance  of  training  schools: 

Special  high  school  fimd 

Hunter  College  special  bi|^  school  fond 

B,  Donations 

VU.  Rentals 

A.  Rentals  of  public  utilities:  subway  oompanies 

a.  Interest  on  bonds,  Contracts  1  and  2 
h.  Redemption  of  bonds,  Contracts  1  and  2 

B.  Dock  and  slip  rents 

1.  Leases  for  a  term  of  years 

0.  On  property  along  North  River 
6.  On  property  along  East  River 
e.  On  property  along  Hariem  River 

d.  On  property  in  Bronx 

e.  On  property  in  Brooklyn 

/.  On  property  along  Jamaica  Bay 
g.  On  property  in  Richmond 

2.  Revocable  privileges 

a.  On  property  along  North  River 
6.  On  property  along  East  River 
c  On  property  along  Hariem  River 

d.  On  property  in  Bronx 

e.  On  property  in  Brook^ 
/.  On  property  in  Queens 

g.  On  property  in  Richmond 

3.  Wharfage 

C.  Ferry  leases 

a.  On  those  operating  in  North  River 

h.  Miscellaneous 

D.  Franchise  fees 

1.  Street  railroad  companies 
a.  Operating  in  Manhattan 
5.  Operating  in  Bronx 
e.  Operating  in  Broddyn 

d.  Operating  in  Queens 

e.  Operating  in  Ridmiond 


Financial  Ai»iiNiBii&A!noN;  Apfbndiz  K  313 

2.  Onmibus  companies 

a.  Operating  in  Manhattan 

6.  Operating  in  Manhattan  and  Qugens 

c.  Operating  in  Bronx 

d.  Operating  in  Queens 

e.  Operating  in  Brooklyn 
/.  Operating  in  Richmond 

3.  Tunnels,  Pennsylvania  Railroad  Company 

4.  Light  and  power  companies 

a.  In  Manhattan 
6.  In  Brooklyn 

c.  In  Richmond 

5.  New  York  Steam  Company 

6.  Public  service  (stock  quotations,  telegn^iliy  etc.) 

7.  Mail  transportation  tubes 

8.  Dunmiy  engines 

E,  Tolls  on  bridges;  Brooklyn  Bridge 

F.  LoBBOB  erf  markets 

A.  Maiket  cellar 
6.  MariGet  stands 
c  Maxk0t  k»l8 

0.  An  other  rentals 

1.  Unimproved  lands 

a.  Former  town  of  Gravesend 
h.  Water  k>ts 

e.  Ground  in  itue  several  b(»oughs 

2.  Real  estate  and  buildings 

a.  Houses 

b.  Park  buildings 

3.  Halls  and  rooms  in  government  buildings 

a.  Armories 

b.  Auditoriums  in  school  buildings 
c  Rooms  in  Municipal  Building 

d.  Rooms  in  Bergen  Buflding 

4.  Miscellaneous  structures,  etc. 

a.  Steeplechase  Pier,  Coney  Island 

b.  Stadium  of  City  College 

e.  "Property  under  jurisdiction  of  Board  of  Trans- 
portation" 

d.  New  Yoik  Oonnecting  Railroad 

e.  Staten  Island  ferry  bnett 

/.  lifisoellaneous  rentals  of  Dqwrtment  of  Water 
Supply^  Qas  and  Eleetrioity 

5. 


314  New  York  Cmr's  Financbs  and 

VIII.  Earnings  of  public  service  enterprises 

A.  Water  supply 

a.  "Frontage  and  meter  rates" 
h.  "Building  purposes" 
c  "Hose" 

d.  "Shipping  purposes" 

e.  "Street  sprinkling" 
/.  Setting  water  meters 

B.  Municipal  ferries:  tolls 

a,  Astoria  fei^y 

h,  Classon  Point  feny 

e.  Grand  Street  feny 

d.  Staten  Island  ferry 

e.  Rockaway  Beach  and  Barren  Island 
/.  Greenpoint  feny 

Q.  39th  Street  feny 

C  Municipal  railways,  trolleys,  and  bus  lines 

1.  Passenger  receipts 

a.  Staten  Island  and  Midland  Railroad  Company 
6.  Trackless  trolley  system,  Staten  Island 
c.  Williamsburg  Bridge  trolley  line 

2.  Revmiue  from  advertising  in  cars 

a,  Staten  Island  and  Midland  Railroad  Company 
6.  Williamsburg  Bridge  trolley  line 

3.  Car  and  station  privileges:  Trackless  trolley  system, 
Staten  Island 

IX.  Earnings  of  general  departments 

A.  Fees  and  commissions 
1.  L^alfees 

a.  "Desk  fees" 

City  Clerk 

City  Chamberlain 

Coflonty  Clerk 

Public  Administrator 

Register 

SheriflF 

Surrogate 
h.  Notary  fees 

c.  Court  fees 

d.  Jury  fees 

e.  Subpoenas 

/.  Fees  on  sale  of  city  property 


Financial  Adminibisaiion:  Appendix  K  315 


g.  Land  tide  registration 

h.  Naturalization  fees 

i.  Marriage  license  fees 

j.  Fees  for  performanoe  of  marriage  cerranony 

2.  Inspectional  fees 

a.  Meat  inspection 

b.  Market  wagon  fees 

c.  Examination  of  plumbers 

3.  Fees  from  non-inatiioulated  students  and  non-resident 

pupils 

a.  City  College 

h.  Hunter  College 

c.  Continuation  schools 

4.  Fees  for  use  of  public  facilities,  and  admission  charges 

a.  Municipal  baths 

b.  Comfort  stations 

c.  Camp  sites 

d.  Golf 

e.  Tennis 
/.  Croquet 
g.  Lockers 

Miscellaneous 

5.  Chamberlain's  commissions  for  collection  of  state 
taxes 

B.  Sale  of  maps,  transcripts,  publications,  and  by-products 

1.  Sales  of  maps,  plans,  etc. 

a.  By  the  Board  of  Elections 

b.  By  the  Board  of  Estimate  and  Apportionment 

c.  By  the  several  borough  presidents 

d.  By  the  Transit  Conmaission 

e.  By  the  Board  of  Transportation 
/.  By  the  Department  of  Bocks 

2.  Searches,  transcripts,  etc. 

a.  By  Collector  of  Assessments  and  Arrears 

b.  By  City  Clerk 

c.  By  Tenement  House  Department 

d.  By  Health  Department 

3.  Sales  of  publications 

a.  City  Record 

b.  Bulletins  of  the  Board  of  Standards  and  Appeals, 
Municipal  Reference  Library,  etc. 

c.  Registry  lists  of  election  enrollment 


316 


Nsw  YoBx  Citt'8  Finangbs  and 


iu  Sales  of  by-^nodaets 

a.  Antitcndii  and  vaccine 

b,  Artidea  manufactured  by  Department  of  Cor- 
rection 

e.  Articles  manufactured      vocational  and  trade 

schools 

d.  Afiimala  from  ifllngiftal  g^ivift^ 

X  Miscellaneous  general  earnings 

A.  Bevenme  from  investments 

1.  On  investments  other  than  those  of  sinking  ftmds 

a.  Interest  on  bonds  and  mortgages  on  account  of 

sales  of  city  property 
5.  Interest  on  mortgages  under  jurisdiction  of  the 

Board  at  T^am^rtation 

e.  Interest  on  seeurities  of  the  Louisa  Mintum  fund 

2.  On  investments  of  the  sinking  funds 

B.  Interest  on  bank  deposits 

1.  Intmst  on  sinking  fund  deposits 

2.  Interest  on  dty  treasuiy  deposits 

3.  Interest  on  departmental  deposits 

4.  Interest  on  security  deposits 

5.  Interest  on  criminal  bail  deposits 

C.  Other  interest  and  penalty  chaiges 

1.  Penalties  on  proper^  taaoes 

2.  Interest  on  miscellaneous  taxes 

3.  Interest  on  assessments 

4.  Interest  on  water  rates 

5.  Interest  on  tax  sale  liens 

6.  Accrued  interest  on  Corporate  Stock  and  Serial  Bonds 

sold 

7.  Interest  on  judgments  for  costs 

8.  Interest  and  penalties  on  misceBaneous  defened  pay- 
ments 

D.  'Fmsskm  on  sale  of  Corporate  Stock  and  Serial  Bonds 

a.  Miscellaneous  aoemals,  ehaigesy  deductionSi  refunds,  and  rrim- 
bursements 

A.  Applicable  to  tax  reductii 

1.  Board  of  inmates  of  institutions  and  conunitted 
children 

2.  Daniage  to  departmental  property 


Financial  Administbation:  Appendix  K  317 


3.  Reimbursements  for  labor  and  material  furnished  by 
various  departments 

4.  Conadenee  money 

5.  Miscellaneous  lebates  and  rambunementi 

B.  Restricted  to  specific  purposes 

1.  Damage  to  departmental  property 

2.  Reimbursements  for  labor  and  nrmtprift^^  furnished  by 

various  departments 

3.  Redemption  of  lands  purahased  for  taxes  or  nsnrpn 
ments 

4.  Deductions  from  payroOs 

5.  Special  deposits 

6.  Ekiforoed  collections 

7.  Reimbursements  on  account  of  contractual  agree- 
ment on  ci^tal  projects 

a.  Bronx  Parkway 

6.  Jamaica  Bay  improvement 

c  New  York  and  New  Jersey  bridge  and  tunnel 

d.  City  College 

e.  Catddll  aqueduct 

8.  MisoeOaiieous  lebates  and  rdmbuisements 

XU.  Sale  ot  assets 

A.  City-owned  real  estate 

1.  Sold  under  Sec.  205  of  the  Charter 

2.  Property  under  jurisdiction  of  the  Board  of  Transpor- 
tation 

3.  Sold  at  auction 

4.  Proceeds  collected  on  account  of  judgments 

B.  Waste  materials^  etc. 

1.  Discarded  ferry  boats 

2.  Old  buUdings 

3.  Discarded  equipment 

4.  Miscellaneous  waste  materials 

XIII.  Borrowings 

A.  Revenue  Bills 

B.  Special  Revenue  Bonds 

C.  Tax  Notes 

2>.  Corporate  Stock 
B.  Serial  Bonds 


318        New  Yobk  City's  Finangbs:  Appendix  K 

Note :  The  classification  presented  above  is  based  upon  the  intomatioii 
contained  in  the  Comptroller's  Report  for  1926. 

In  general,  the  items  of  subclassification  (those  indicated  by  a,  6,  c, 
etc.,  and  some  of  those  indicated  by  1,  2,  3,  etc.)  are  expressed  in  the 
OomptiQUer's  tenninology.  The  other  designations  and  the  grouping  of 
items  bave  been  chosen  largely  in  conformily  with  those  suggested  in 
Oakey's  Principe  <4  Gwemment  Acemmting  and  BeparHng,  but  with 
some  necessary  modifications. 

It  is  also  to  be  noted  that  the  Comptroller's  Report  does  not  include 
certain  departmental  receipts  that  are  not  paid  into  the  city  treasury 
and  sinking  funds.  To  the  extent  of  those  omissions,  the  dassihcation 
presented  is  incomi^ete. 

It  is  to  be  borne  in  mind,  also,  that  the  dassification  is  one  of  receipts, 
not  of  income  accrued.  Hence  it  includes  certain  items,  for  example, 
"refunds"  and  "reimbursements"  which  are  reductions  of  expendi- 
tures, not  income. 


APPENDIX  L 


Licenses  jlsd  Pebiots  in  New  Yobk  Cm' 

In  May,  1927,  the  Commissioner  of  Accounts  completed  an  important 
report  on  "Fees  for  Licenses  and  Permits  Collected  by  various  De- 
partments, Cost  to  the  City  for  the  Service  Rendered,  and  Correspond- 
ing Receipts  from  each  Source  for  the  Year  1925."   TTie  survey  covered 

bureaus  in  the  following  departments:  Police,  Licenses,  City  Clerk, 
Fire,  Health,  Mayor's  Office,  Parks,  Examining  Board  of  Plumbers, 
Water  Supply,  Gas  and  Electricity,  Tenement  House,  Public  Welfare, 
Street  Cleaning,  Plant  and  Structures,  Public  Markets,  City  Chamber- 
lain, Collector  of  Assessments  and  Arrears,  Collector  City  Revenue, 
Borough  Presidents,  County  C]^:kB,  County  Re^^sters,  Sh^iffs,  Public 
Administrators  and  Courts. 

The  report  included  careful  tables  showing  in  detail  the  present  fees 
charged,  the  dates  on  which  they  became  effective,  the  receipts  in  1925, 
the  estimated  cost  of  service,  the  approximate  loss  or  profit,  the  number 
of  permits  issued  and  the  corresponding  fees  charged  in  certain  other 
cities  selected  for  purposes  of  comparison.  These  tables  are  too  elabo- 
rate to  be  published  here.  Their  information,  however,  is  sufficiently 
indicated  in  the  text  of  the  Commissioiier's  report;  the  principal  portions 
of  which  follow: 

Police  Depabtmsnt 

Steam  Boiler  Inspection:  Steam  boilers  are  inspected  annually  by 
this  Department  and  certificates  of  inspection  are  issued.  Stationary 
engineers,  firemen,  and  ice  machine  operators  are  examined  and  certifi- 
cates are  issued  to  them  renewable  annually.  The  fee  for  boiler  inspec- 
tion is  $2;  (^/ee^remofnedunc^fH/edmncei^^*  No  fee  is  charged 
far  examining  and  licensing  engineers,  firmen,  and  ice  machine  oper- 
ators. The  estimated  cost  of  this  service  for  the  year  1925  was  $48,094. 
'  The  receipts  amounted  to  $27,682,  or  $20,412  less  than  the  cost  of  the 
service  rendered.  13,841  boilers  were  inspected;  1,714  licenses  and 
11,949  renewals  of  licenses  were  issued.   The  charges  in  Philadelphia 

319 


320  New  York  City's  Finances  and 


aie,  for  boiler  inspectioa  $3  plus  20  cents  per  square  foot  of  grate  area, 
for  origiiial  licenses,  $3,  and  for  yearly  r^wak,  $1. 

Special  Police  Shields.  These  shields  are  issued  to  banks,  trust 
companies,  hospitals,  and  traction  companies  for  use  by  special  patrol- 
men in  their  employ.  No  fee  is  charged,  but  a  deposit  of  $10  is  re- 
quired. This  is  refunded  when  the  shield  is  returned.  The  cost  of 
this  service  for  the  year  1925,  exclusive  of  the  work  of  investigating 
prospective  special  patrohnen,  was  $694.76  and  the  number  of  shields 
issued  was  741.   In  Jersey  City  a  fee  of  $5  is  charged  for  this  privilege. 

Taxicabs.  The  licensing  of  taxicabs  and  hack  drivers  was  transferred 
from  the  Department  of  Licenses  to  the  Police  Department  on  April  11, 
1025.  The  rates  for  licenses,  as  fixed  by  oidiiiance  amended  March  6, 
1S21,  are  as  follows: 

Public  Taxicab  yearly  $10.00 


it   J^tenn  5.00 

«     Coach     [    .  yearly  10.00 

u         ft   3^  term  5.00 

Little  Taxicab   yearly  5.00 

u         it   y2  term  2.50 

Public  Cab   .  \    \  yearly  ^.00 

ti       it   tenn  2.60 

Sightseeing  Ckr  !    !    !  7^7  ^0.00 

"         «  3^  term  6.00 

Hackdrivers'  Examination,  certificate  and  equipment,  tl.OO 

Hackdrivers'  renewal,  yearly 

Article  8,  Chapter  14,  Section  80  of  the  Code  of  Ordinances  defiiifiB 

vehicles  as  follows: 

Cab,  a  public  hack  so  designed  and  constructed  as  comfortably  to 
seat,  in  the  opinion  of  the  Commissioner  of  Licenses,  not  more  than  2 

persons  inside  thereof. 

Coach,  a  public  hack  so  designed  and  constructed  as  comfortably 
to  seat,  in  the  oiunkm  <rf  the  Commianoner  ol  LicenaeB,  4  or  mxae  pep- 
sons  inside  therefof . 

Little  taxicab,  a  cab  driven  by  meehanical  power  on  whidi  a  taxi- 
meter is  affixed. 

Taxicab,  a  coach  driven  by  mechanical  power  on  which  a  taximeter 
IS'  atuxcci. 

During  the  period  January  1,  1925,  to  April  11,  1925,  the  Depart- 
ment of  licenses  issued  37  Hoenses  for  puWie  taxicabs  one-half  tenn 
at  $5;  19  Ucenses  for  pubUc  coaches  for  tiie  year  at  $10;  and  28  lioenseB 


Financial  Administration:  Appendix  L  321 


for  public  coaches  one-half  term  at  $5.   The  PoUce  Department,  during 
the  period  April  11  to  December  31  did  not  issue  any  of  these  classes 
licenses,  although  the  Department  of  Lionises  during  the  preceding 
year  had  issued  587  licenses  for  pubUc  taxicabs,  287  for  pubic  taxicabs 

half  term,  203  for  public  coaches,  and  19  for  public  coaches  half  term. 
The  Police  Department  apparently  classed  all  taxicabs  and  coaches  as 
httle  taxicabs  at  a  rate  of  $5  annually  instead  of  at  $10,  as  formerly 
charged  by  the  Department  of  Licenses. 

The  fines  collected  from  hack  drivers  by  the  Department  of  Licenses 
for  the  period  January  1  to  April  11  (3J^  months)  amounted  to  $5,149. 
The  fines  collected  by  the  Police  Department  for  the  period  April  11 
to  December  31  (8j^  months)  amounted  to  $995.30.  These  fines  repre- 
sent penalties  imposed  for  violations  of  the  rules  of  the  Department 
and  not  for  traffic  violations.  Under  the  Department  of  Licenses  the 
Commissioner,  Deputy  Commissioners,  the  Chief  of  the  Division  of 
Licensed  Vehicles,  and  the  Chief  of  the  Brooklyn  Office  of  the  Depart- 
ment had  power  to  hear  and  det^mine  ocmiplaints  against  licensees, 
subpoena  witnesses,  take  testimony,  and  impose  a  fine  ci  not  more  than 
S5  or  less  than  $1. 

The  receipts  from  taxicab  licenses  for  the  year  July  1,  1925,  to  June 
30,  1926,  amounted  to  $134,290,  and  the  estimated  cost  of  this  service 
for  the  same  period  was  $131,989.30,  or  an  approximate  excess  of  re- 
ceipts over  costs  of  $2,300.17.  The  receipts  from  hack  drivers'  licenses 
and  renewals  for  the  same  period  amounted  to  $48,661  and  the  esti- 
mated cost  of  the  service  and  equipment  furnished  to  the  drivers  was 
$154,366.45,  or  an  iq^roximate  loss  to  the  City  of  $105,705.45. 

The  fee  charged  for  public  taxicab  licenses  in  Jersey  City  and  Hobo- 
ken  is  $20.  The  fee  for  hack  drivers'  examinations  and  licenses  in 
Hoboken  is  $2. 

Depabtment  of  Licenses 

Tlie  fee  diarged  for  biUiard  and  pool  tables  is  $5  per  annum  per 
table.   In  1925,  9,940  tables  were  licensed.   Philadelphia  chaiges  $15, 

San  Francisco,  $24,  and  St.  Louis,  $10. 

The  fee  for  employment  agencies  is  $25  per  annum.  1,054  agencies 
were  licensed  during  1925.  The  fee  charged  in  Philadelphia  and  Chicago 
is  $50,  in  San  Francisco  $96,  and  in  St  Louis  $50  to  $300. 

The  fee  for  junk  shops  is  $20  per  annum  and  626  such  licenses  were 
issued  during  1925.  The  fee  chaiged  in  Chicago  is  1200;  in  San  Fran- 
dfloo  it  is  $50  to  $160,  and  in  St.  Louis  $25  to  $500. 


322 


New  York  City's  Finances  and 


Motaon  pictuie  theatres  are  charged  a  fee  of  $100  per  year,  or  $50 
for  a  half  year.  320  lioenaes  for  the  fuU  year  and  38  licenses  for  the 
half  year  were  issued  in  1926. 

The  licenses  issued  for  moving  picture  theatres  provide  only  for 

theatres  having  a  capacity  of  not  more  than  600.  All  houses  having  a 
capacity  of  more  than  600  are  licensed  as  Common  Shows.  The 
annual  license  fee  for  houses  with  a  capacity  of  more  than  600  and  not 
more  than  1,000  is  $150,  and  for  houses  with  a  capacity  of  more  than 

1  000  the  fee  is  1^200. 
The  fee  charged  m  Chicago  is  $200  to  $1,500;  in  Hoboken  it  is  $202, 

and  in  San  Francisco  $100  to  $400. 
The  fee  for  theatre  licenses  is  $500  per  annum  and  has  remained 

unchanged  since  1872.  193  licenses  and  8  commuted  licenses  were 
granted  in  1925.  The  fee  charged  in  Chicago  is  $200  to  $1,500,  and 
m  San  Francisco  it  is  $400  to  $600. 


Dbpabtment  or  Health 

The  only  fees  collected  by  this  Department  during  1925  were  those 
for  issuing  transcripts  of  births,  deaths,  marriages,  sanitary  violation 
searches,  and  parents'  cards.  Fees  of  50  cents  for  original  transcripts 
and  25  cents  for  each  copy,  25  cents  for  copy  of  certificate  of  permits, 
and  10  cents  for  parents'  cards  are  chaiged.  The  receipts  for  1925 
amounted  to  $85,710.77  and  the  estunated  cost  of  the  service  was 
$87,727.36,  or  an  approximate  loss  to  the  city  of  $2,016.59. 

The  following  table  shows  the  fees  charged  in  Hoboken  for  various 
permits  for  which  either  no  fee  was  charged  or  no  permit  was  required 
in  New  York  in  1925.  The  number  of  permits  issued  in  New  York 
in  1925  is  also  shown: 

Number  of 

Permits  issued 
Fm— Hoboken  N.  Y.  {no  fee) 

Bftkere   ^  ^^^^  required 

Barber  shops   ?  7,470 

Butchers  (retail)   5  None  required 

Butchers  (wholesale)   10 

Butter,  eggs  and  cheese  dealers   5 

Gonfectioiiere  (retail)   ^ 

ConfectioneTS  (wholesale)    ........  10 

Fat,  rendering  of,  carting  of     ......    •        10  .  , 

Fish  dealers   5         None  required 

Grocers  

Hotels,  5  to  20  rooms   50 

Hotels,  more  than  20  rooms     .......  100 


u  « 

II  tt 

II  II 

II  II 


II  II 

II  M 
M  l< 


Financial  Adminibcration:  Appendix  L  323 


Number  of 
Permits  issued 
Fee— Hoboken   N,  Y,  (no  fee) 

Lodging  houses,  per  bedroom   1  99 

Laundries  «   5  None  required 

Non-alcoholic  bevereges,  sale  of   100  "  '* 

Non-alcoholic  transfer  of  permit   10  " 

Milk  and  milk  produets,  sale  of  (exdusive  of  sale  ia 

retail  stores)   5  471 

Restaurants   10  20,311 

Slaughter  houses,  poultry    .   100  367 

EXAinNINO  BOABD  OF  PLUMBERS 

The  fee  for  plumbers*  licenses  is  $5.  The  yearly  charge  for  renewals 
is  S2.  In  1925, 1,896  licenses  and  1,737  renewals  were  issued.  Hoboken 
charges  $15  for  a  liorause  and  $15  for  yearly  renewals. 

Department  of  Water  Supply,  Gas  and  Electricity 

The  cost  of  inspecting  the  installation  of  electric  cables  under  and 

above  ground  and  the  construction  of  conduits  for  the  year  1925 
amounted  to  $107,624.  The  Department  endeavored  to  collect  these 
costs  but  has  not  succeeded  in  doing  so.    A  test  case  is  now  pending. 

No  fee  is  charged  for  interior  electrical  installations.  During  the 
year  1925  there  were  287,177  inspections  made  and  176,257  oertifi- 
eates  of  approval  were  issued.  The  estimated  cost  of  this  service  was 
$194,044.  The  Board  of  Fire  Underwriters  collects  fees  for  its  in- 
spections. 

Electrical  inspections  are  charged  for  in  Chicago,  Detroit,  Los 
Angeles,  Pittsburgh,  Kansas  City,  and  other  municipalities.  In 
Chicago,  the  Board  of  Fire  Underwriters  accepts  for  its  purposes  the 
approval  of  electrical  installations  by  the  city,  and  no  fee  is  charged 
by  the  Board.  The  revenue  derived  by  the  City  of  Chicago  frran  this 
source  is  over  $200,000  per  year.  This  is  considerably  more  than  the 
cost  of  the  service  rendered. 

Operators  of  motion  picture  machines  are  examined  and  licensed 
without  payment  of  fees,  and  permits  are  renewed  yearly;  2,569  per- 
mits were  issued  in  1925. 

Borough  Presidents 

In  the  Borough  Presidents'  Offices  the  fees  charged,  if  any,  are 
purely  nominal  except  in  a  very  few  instances.  In  Manhattan  it  is 
the  practice  to  charge  80  cents  for  corporation  permits  and  $1  for  all 

others,  excepting  permits  for  sewer  connections,  erection  of  signs, 


New  York  City's  Financbs  and 


constructing  vaults  under  sidewalks,  etc.  This  fee  is  intended  only  to 
cover  the  cost  of  issuing  the  document.  In  the  Bronx  there  is  no  fee 
charged,  except  in  the  few  cases  mentioned  above  ^plying  to  Manhat- 
tan. In  Queens  the  practice  is  to  charge  an  inspection  fee  of  $2.60 
when  permits  are  issued,  if  the  nature  of  the  work  ta  be  done  requires 
imqpection. 

DqiOBits  or  bonds  are  required  in  aU  boroughs  to  cover  restoration 
and  replaconent  costs  when  permits  are  granted  for  any  purpose  which 
requires  disturbmg  the  pavement,  w  for  purpoees  whieh  might  result 
in  damage  to  the  pavement. 

No  comparison  of  costs  and  receipts  is  given  for  these  offices  as  the 
receipts  are  made  up,  to  a  great  extent,  of  security  deposits  which  are 
subject  to  refund  when  the  permittee  performs  the  work  of  restoration, 
(Mr  which,  in  case  the  city  makes  the  restoration,  are  reimbursements 
to  the  dty  for  the  cost  of  labor  and  material. 

VauUs.  Permits  to  construct  vaults  under  sidewalks  are  granted  by 
the  Borough  Presidents.  The  cost  of  this  privfl^,  fixed  by  ordmances, 
ranges  from  30  cents  to  $2  per  square  foot,  acoordmg  to  the  assessed 
valuation  of  the  adjoining  property.  The  first  cost  is  the  only  revenue 
derived  by  the  city  from  these  privileges.  During  the  year  1025 
there  were  572  permits  of  this  class  issued  in  Manhattan,  30  in  the 
Bronx,  125  in  Queens,  and  472  in  Brooklyn— a  total  of  1,199  for  the 

^^These  vaults  are  used  for  a  great  variety  of  purpoees,  mcluding  bowling 
alleys,  restaurants,  boiler  rooms,  storage  i^»ces,  bakers'  ovens,  etc. 
There  are  thousands  of  them  in  the  city  and  if  a  fair  annual  rental 
were  charged  for  their  use  the  resulting  revenue  would  be  considerate. 

Btdlding  Construction  and  Alteration.  No  fees  are  charged  for  ex- 
aminmg  and  fiUng  plans  submitted  with  applications  for  building  per- 
mits. The  city  renders  a  real  service  in  performing  this  work.  Many 
plans  are  filed  by  persons  who  have  no  mtention  of  erectmg  buildings, 
in  order  to  enhance  the  values  of  theur  lots.  The  building  permits 
have  a  value  for  which  the  lot  purchaser  is  willing  to  pay.  The  cost 
of  this  service  is  paid  for  by  the  taxpayers  in  graicral,  who  have  only 
an  indirect  interest  in  the  matter,  while  the  service  rendered  is  a 
purely  personal  nature.  The  figures  given  below  were  compiled  by  the 
Bureau  of  Buildings,  Brooklyn,  in  order  to  show  how  the  Bureau  m 
that  Borough  might  be  made  self-sustaining. 

Value  of  buildings  for  which  applications  wm  filed  (yearly  average 
for  the  past  eight  years),  $203,670,750.00. 


Financial  Administration:  Appendix  L  325 


Estimated  revenue  at  a  fee  of  of  1%  for  filing 
and  examination  of  plans  and  applications  for 

building  permits,  yearly   $509,176.87 

Budget  appropriation  1927    436,489.00 

£1x0688  over  budget  i^propriatioii     ....    $  72,687.87 

These  Bureaus  also  make  violation  searches  and  tests  of  building 
materials,  and  issue  certificates  of  occupancy,  plumbers'  registration 
certificates,  certificates  of  competency  of  elevator  operators,  and  ap- 
provals of  amusement  devices,  dance  halls,  motion  picture  houses,  and 
theatres.   No  fees  are  charged  for  any  of  these  services. 

County  Offices 

Fees  of  CJounty  Clerks  are  fixed  by  Sections  1557  and  1557a  of  the 
Civil  Practices  Act,  as  amended  by  Laws  of  1925.  The  latter  section 
relates  to  the  counties  of  New  York,  Kings,  and  Richmond,  and  the 

former  to  the  counties  of  Bronx  and  Queens.  Although  the  fees  fixed 
by  law  vary  in  the  two  groups  of  counties,  those  actually  charged  in 
the  five  counties  are  practically  uniform.  All  fees  collected  by  county 
clerks  are  returnable  to  the  City  Treasury. 

The  fees  collected  by  County  Registers  in  the  Counties  of  Kings, 
Queens,  and  Richmond  are  fixed  by  the  laws  of  1917;  those  ooUeeted 
in  New  York  Coimty  by  the  laws  of  1926,  and  those  in  Bronx  County 
by  the  laws  of  1925.  The  fees  fixed  for  the  five  counties  are,  with  few 
exceptions,  uniform  excepting  that  in  New  York  County,  fees  for  a 
greater  number  of  services  are  provided.  All  fees  collected  are  return- 
able to  the  City  Treasury. 

^leriffs'  fees  are  fixed  for  all  counties  of  Greater  New  York  by  Chap- 
ter 626  of  the  laws  of  1922.  In  Richmond  County  the  Sheriff  retains 
the  fees.   In  all  other  counties,  fees  are  returnable  to  the  dty  treasury. 

Public  Administrators  in  the  Counties  of  New  York,  Kings,  Queens, 

and  Richmond  receive  the  following  fees:  For  receiving  and  paying 

out  all  sums  of  money  not  exceeding  $2,500  a  fee  of  5%;  for  receiving 

and  paying  out  all  sums  of  money  exceeding  $2,500  a  fee  of  2J^%. 

In  Bronx  County  the  Pubhc  Administrator  receives  the  following  fees: 

For  reoeiyiiig  and  paying  out  all  sums  of  money  not  exceeding  $2,000  .  .  10% 

"         "      "        "      "   "  additional  sums  not  ezoeeding  20,000  .  .  5% 

"         "      "        "      «   "         "         "     "        "      28,000  .  .  3% 

"         "      "        "      "   "  sums  of  money  in  excess  of    $50,000  .  .  4% 

In  the  Counties  of  Bronx  and  Richmond  the  fees  belong  to  the 
PabUc  Administrators.  In  all  other  counties  of  the  city  fees  are  ro- 
tumable  to  the  City  Treasury. 


APPENDIX  M 


DlQllST  OF  OmCIAL  AND  UNOFFICIAL  RePOBTS  SiNCE  1905,  ReLATENO 

TO  Revenues  of  New  York  City 

The  following  pages  consist  of  brief  digests  of  the  more  important 

official  and  unofficial  reports  issued  since  1905,  dealing  primarily  with 
the  revenues  of  the  City  of  New  York. 

Final  Report  of  Advisory  Commission  on  TaxaMon  and  Finance,  Edgar 
J.  Levey,  Chairman,  (1905-1908,  162  pp.). 

To  provide  for  existing  arrears  in  taxes  levied  and  deemed  unooUectr 
Me,  the  report  proposed  that  the  Board  of  Estimate  be  permitted  to 
authoriae  Corporate  Stock  equal  in  amount  to  the  deficiency  deemed 

uncollectible. 

For  the  annual  deficiency  in  taxes,  the  Commission  recommended 
that  the  Board  be  permitted  to  insert  in  the  budget  a  sum  equal  to  so 
much  of  the  deficiency  of  the  preceding  year  as  was  not  provided  for  in 
prior  tax  levies  or  by  such  issue  of  Corporate  Stock.  This  would  repeal 
the  section  of  the  Charter  which  authorizes  the  Board  ol  Aldermen  to 
increase  the  tax  levy  to  provide  for  uncollectible  back  taxes. 

The  Commission  found  the  personal  property  tax  impracticable  of 
operation  and  unfair  in  so  far  as  enforced.  It  found  the  method  of  en- 
forcing payment  of  arrears  of  real  estate  taxes  and  assessments  and  water 
rents  wholly  inadequate  to  enforce  rights  of  city  [since  amended  by 
statute];  report  reveals  defects  in  aoooanting  flgnst^  and  oppoaoi 
dbange  in  time  of  collection  of  taxes. 

Report  cfCcmmisnon  onNewSowrcescf  Bemnue,  (January  11, 1913, 116 
pp.). 

Recommends  decrease  in  the  rate  of  taxation  on  personal  property  to 
insure  greater  certainty  of  collection  and  the  placing  of  the  burden  of 
local  government  on  those  forms  of  property  which  represent  values 
laroely  created  by  the  community  itself. 

329 


Financial  Administration:  Appendix  M  327 


The  Report  made  the  following  specific  recommendations: 

1.  That  adequate  annual  payments  be  made  for  the  privilege  of 
erecting  and  maintiaining  billboards  and  signs. 

2.  Requirement  of  adequate  annual  payments  for  the  use  of  the 

city's  sub-surface. 

3.  Repeal  of  Section  48  of  the  Tax  Law  [relating  to  deduction  in 
rental  payments  from  tax  franchise]. 

4.  Imposition  of  a  flat  unearned  increment  tax  on  future  iomKm  in 
land  values.    [See  below] 

5.  Granting  of  broader  licensing  powers  to  the  Oily  of  New  York 
[now  available  under  Home  Rule  Amendment]. 

6.  New  or  increased  miscellaneous  sources  of  city  revenue. 

(a)  The  extension  of  the  sale  of  privileges  at  pubhc  auction. 
(6)  Increases  in  certain  county  fees. 

(c)  The  passage  of  an  adequate  ordinance  for  liflAnmng  hack 

stands. 

(d)  The  licensing  of  animal-drawn  vehicles. 

(e)  Increase  in  the  motor  vehide  tax,  and  contribution  of  part  of 
that  tax  to  the  city. 

(0  Extension  of  the  use  of  water  meters. 

(jg)  Leasing  of  Jamaica  Bay  lands,  title  to  idiich  was  vested  by 

the  state  in  the  city. 
(h)  IntelUgent  organization  of  city  prison  labor  with  reference  to 

the  needs  of  city  departments  for  supidies  and  material. 
(0  Better  methods  of  disposing  of  the  city's  unneeded  personal 

property. 

(j)  Sale  of  unused  real  estate  previously  acquired  by  the  city. 

7.  Miscellaneous  recommendations. 

(a)  That  the  city  of  New  York  strongly  support  the  pending 
amendment  to  the  State  Constitution  granting  to  cities  the 
power  of  excess  or  additional  condemnation. 

(6)  That  a  new  sinking  fund  policy  be  considered. 

(c)  Hiat  the  principle  of  special  assessment  be  appUed  to  the 
construction  of  rapid  transit  railroad  extensions. 

(d)  That  the  Banking  Commission  make  an  earnest  effort  to 
secure  a  higher  rate  of  interest  on  deposits  of  <aty  money. 

(«)  That  the  ciiy  take  over  the  franchises  and  property  of  subway 
conduit  companies,  to  which  the  city  is  entitled  under  the 
tenos  of  the  franchises  granted  to  said  companies. 


328 


New  Yoek  City's  Finances  and 


(/)  That  no  fonn  of  real  property,  such  as  churches  or  ceme- 
teries, be  exempt  from  assessment  for  local  improvements. 

(g)  That  the  diy  seU  to  better  advantage  the  aaset  which  it  has  in 
the  commercial  use  of  garbage  and  other  forms    dty  waste. 

(h)  That  the  present  effort  to  provide  a  aelf-wmtalning  mw^et 
system  be  continued. 

(i)  That  all  miscellaneous  sources  of  revenue  now  diverted  to 
pension  funds  or  to  quasi-public  organizations  be  paid  directly 
into  the  dty  treasury;  and  that  so  far  as  such  contributions 
are  necessary  or  desirable  for  th^  future,  they  be  made  by 
direct  budget  appropriation. 

(j)  !niit  outstanding  assessment  bonds  be  disregarded  in  calcu- 
lating the  city's  power  to  become  indebted. 

8.  That  the  personal  property  tax  be  reduced  to  one  mill. 

9.  That  the  payment  of  county  officers  by  fees  be  abolished;  that 
fees  received  be  turned  into  the  dty  treasury  [since  embodied  in 
law]. 

10.  That  the  mandatory  leguJative  aets  pieseribing  the  payrolls  of 
county  officers  be  repealed,  and  the  Board  of  Estimate  and  Appor- 
tionment be  made  responsible  for  county  appropriations. 

The  Ck)mmission's  proposal  of  an  increment  tax  is  of  sufficient  sig- 
mficance  to  be  quoted  in  full: 

"We,  therefore,  recommend  an  incrment  tax  of  1  per  cent,  per  annum 
to  be  perpetual  upon  all  increments  of  land  values  as  shown  by  compari- 
son with  the  assessed  vahiaticMis  <^  the  year  1912,  and  to  be  in  addition 
to  the  general  tax  levied  upon  all  real  estate.  If,  for  instance,  the  as- 
sessed value  of  a  piece  of  land  rises  from  $100,000  in  1912  to  $110,000 
in  1913,  the  owner  would  be  called  on  to  pay  the  general  tax,  say  at  the 
rate  of  1.83,  which  would  amount  to  $2,013,  and  in  addition  the  incre- 
ment tax  of  1  per  cent,  of  $10,000,  or  $100. 

"Sudi  an  increment  tax  would  be  a  levy  in  prapetuily  upon  all  forms 
itf  economic  r^t  hereafter  created  by  the  growth  ai  the  City.  In  this 
respect  it  differs  radically  from  the  tax  in  force  in  foreign  countries.  In 
Germany  and  England  the  increment  tax,  varying  from  10  to  40  per 
cent,  is  levied  once  for  all  on  the  capital  value  of  the  land.  The  owner 
of  land,  having  once  paid  the  tax,  is  entitled  thereafter  in  perpetuity 
to  the  entire  yield  or  rent.  We  believe  it  a  wiser  policy  for  the  city  to 
retain  a  perpetual  claim  upon  the  yktld  or  rental  value  of  the  incle- 
ment, fcMT  then  it  wiU  ocnnmand  a  source  of  ineieasing  revenue  that  wiU 
not  bear  oppressively  upon  the  taxpayer.: 


Financial  Administration:  Appendix  M  329 


"The  proposed  tax  should  not  be  levied  upon  any  increment  which 
results  from  the  labor  or  expenditures  of  ihd  owner.  If  land  appre- 
ciates because  of  improvements  paid  for  by  the  owner,  such  as  grading 

and  clearing,  or  connections  for  water,  Ught,  and  sewage,  or  street 
openings,  paving,  etc.,  such  an  increment,  to  the  extent  that  it  repre- 
sents capital  invested  by  the  owner,  would  not  be  subject  to  the  tax. 
We  impose,  in.  short,  that  the  tax  shall  be  levied  only  upon  the  'un- 
earned' increment,  which  results  fnm  the  growth  of  the  city  and 
from  improv^nents  made  hy  the  dty  or  otheni  than  the  owner 
himself. 

"If,  therefore,  the  value  of  a  piece  of  land  should  rise  ftom  $100,000 
in  1912  to  $110,000  in  1913,  and  the  owner  can  show  that  he  has  ex- 
pended $4,000  in  permanent  improvements,  either  upon  his  own  initia- 
tive or  in  payment  of  special  assessments  levied  by  the  municipality, 
he  would  be  subject  to  an  increment  tax  on  only  $6,000;  and  thereafter 
the  base  vahiation  of  the  land,  from  which  future  incremmtB  would  be 
calculated,  would  be  $104,000  mstead  of  $100,000. 

"The  present  owners  of  land  in  the  city  cannot  object  that  the  pro- 
posed tax  would  produce  any  material  effect  upon  values.  Assuming 
that  land  values  now  represent  a  capitalization  of  income  on  a  basis  of 
5  per  cent,  the  present  tax  rate  of  1.85  is  equal  to  27  per  cent,  of  the 
income  from  land  and  is  responsible  for  a  corresponding  pennanent 
d^mdation  in  tiie  market  value  of  land.  An  increment  tax  of  1  per 
cent,  would  be  equivalent  to  the  annual  appropriation  of  only  about 
12.5  per  cent,  of  the  mcreased  yield  or  rent  underlying  the  incranrait 
of  capital  value.  It  would  slightly  retard  the  advance  of  values,  but 
would  have  no  effect  whatever  upon  the  market  value  of  land  whose 
rent  is  stationary  or  declining.  It  should  be  noted,  however,  that  in 
the  long  run  sudh  an  increment  tax  would  tend  toward  the  reduction 
of  the  general  tax  rate  and  so  toward  a  general  appreciation  in  the  case 
(rf  all  land.  The  potential  or  speculative  value  of  vacant  land  in  scmie 
cases  mi^t  be  slightly  depressed  by  the  imposition  of  an  increment  tax, 
for  the  value  of  such  land  sometimes  represents  in  part  the  capitaliza- 
tion of  an  expected  increment.  The  tax,  however,  would  be  so  small 
a  part  of  the  increment  that  it  practically  would  be  a  neghgible  factor 
as  between  buyer  and  seller. 

"The  average  increase  in  the  land  values  of  New  York  City  during 
the  past  decade  was  about  $150,000,000  a  year.  On  that  basis  an 
incr^nent  tax  of  1  per  cent,  would  yield  in  the  first  year  a  revenue  of 
$1,500,000;  in  the  second  year,  $3,000,000;  in  the  thuxi  year,  $4,500,000; 


330  Nsw  York  City's  Finances  and 


in  the  fourth  year,  16,000,000;  and  so  on,  until  in  the  tenth  year  its 
yield  would  iq^ooxiiiiate  $15,000,000." 

Report  on  Deficiencies  in  Taxes.  Bureau  of  Municipal  Investigation  and 
Statistics,  Finance  Department  (October  29,  1914,  18  pp.) 

This  report,  supported  by  detailed  tables,  indicated  that  only  58.72 
per  cent,  of  personal  taxes  levied  for  years  1899  to  1913  had  been 
eoUected. 

"The  Government  of  the  City  of  New  York,"  Proceedings  of  Academy  of 
Political  Science,  Vol.  6,  April,  1915. 

Thomas  W.  Lamont  discusses  the  "pay-as-you-go"  policy  for  non- 
productiye  enterprises  and  its  relation  to  the  $100,000,000  loan  (made 
in  1914  to  relieve  the  city  from  a  financial  crisb)  (p.  160). 

Prof.  Edwin  R.  A.  Seligman  discusses  the  joint  use  of  the  income  tax 
by  ike  state  and  city  (p.  164). 

Final  Report  of  Committee  on  Taxation,  appointed  by  Mayor  Mitdid; 
Alfred  E.  Marling,  chairman  (January  5, 1916,  398  pp.). 

Its  recommendations  may  be  summarized  thus: 

1.  Opposes  exemption  from  taxation  of  buildings  and  other  improve- 
ments to  realty,  gradually  or  otherwise.^ 

2.  Favors  state  income  tax  as  a  partial  means  of  securing  the  addi- 
tional revenue  required. 

3.  Opposes  adoption  of  k>w  rate  tax  on  intangiUe  or  tangiUe  personal 

property. 

4.  Favors  principle  of  tax  upon  increment  of  land  values. 

5.  Opposes  supertax  on  land  values. 

6.  Favors  unanimously  following  changes  in  the  Tax  Law  to  iniprove 
administaration  and  moderately  increase  revenue;  (a)  that  real  property 
shall  not  be  exempt  when  vacant,  thou^  owned  by  a  charitable  or  other 
similar  corporation:  (6)  tiiat  proviaons  for  deduction  of  surplus  and 
assessed  value  instead  of  actual  value  of  real  estate  be  omitted;  (c)  that 
the  State  Board  of  Tax  Commissions  be  required  to  furnish  local  assessors 
with  full  particulars  concerning  real  property  of  public  service  corpora- 
tions, exdusive  of  their  special  franchises;  (d)  that  Sec.  48  of  Tax  Law 
which  permits  deduction  from  special  franchise  tax  of  amounts  paid  by 
owner  as  rental  for  the  franchise  and  any  sums  paid  for  car  licenses, 

1  See  also  technical  studies  by  R.  M.  Haig,  The  Exemption  of  Improvementa  from 
Taxation  in  Canada  and  the  United  States  (1915»  2W  pp.)  and  PrtbMe  Effects  of 
Bxemptum  of  ImprmtemaUs  from  TagBoHim  In  Nms  York  CUif  (1915^  254  pp.),  pn- 
pwed  for  this  Gonmiitlee. 


Financial  Administeation:  Appendix  M  331 


taxeS;  etc.  be  repealed;  (e)  that  the  Secretary  of  State  be  required  to 
send  duplicate  reports  of  incorporations  to  the  local  assessors  interested. 

7.  Favors  appointment  by  tiie  Mayor  of  a  committee  on  the  question 
of  raising  ad^tional  revenue  from  special  assessments  and  of  possiUe 

improvements  in  laws  relating  to  them. 

Report  of  the  Joint  Legislative  Committee  for  the  Investigation  of  the  Fi- 
nances of  the  City  of  New  York.  Submitted  February  7,  1916.  (22  pp.) 
and  appendix  and  Legislative  Document  No.  25,  (56  pp.). 

The  occaoon  for  the  investigation  was  objection  by  the  city  adminis* 
tration  to  the  amount  asked  of  the  city  for  the  support  of  the  state 
government  (6  per  cent,  of  the  city  budget). 

The  report  analyses  the  debt  situation  and  shows  that  the  city  has 
consistently  borrowed  up  to,  and  by  various  devices  has  exceeded,  the 
debt  limit.  The  committee  condemned  the  practice  of  keeping  large 
quantities  of  short  term  paper  on  the  market  and  presented  a  WL  making 
tax  collections  take  place  on  January  1,  and  July  1. 

The  report  describes  the  embarrassed  state  of  the  city's  finances  in 
1914,  which  necessitated  the  $100,000,000  loan  from  a  syndicate  of 
citizens.  At  that  time  the  adoption  of  a  "  pay-as-you-go policy  for 
public  improvements  was  required  by  the  syndicate,  and  the  Board  of 
Estimate  and  Apportionment  accepted  it.  The  committee  recom- 
mends that  this  be  made  a  part  of  permanent  policy  by  being  incorpor- 
ated in  the  City  Charter.^ 

The  committee  also  saw  dangers  in  investing  sinking  fund  accumula- 
tions in  city  bonds.  It  recommended  that  sinking  funds  be  abolished 
and  that  serial  bonds  be  substituted,  and  the  diversion  of  city  revenues 
to  special  funds  for  particular  purposes  or  units  be  abolished. 

It  recommended  further  that  the  question  of  mandatory  charges  on  the 
city  for  the  Department  of  Education  should  be  submitted  to  a  referen- 
dum in  the  city;  that  county  administration  within  the  city  should  be 
placed  under  elective  boards;  that  the  Board  of  Estimate  should  be  put 
in  charge  of  county  finances,  and  that  the  Constitution  should  be  amend- 
ed so  that  bills  relating  to  a  county  wholly  within  a  city  should  be  city 
biUs.2 

The  committee  felt  that  in  general  the  contribution  made  by  the  city 
to  the  state  government  in  direct  and  indirect  taxes  was  reascmable  and 

1  See  §  169  of  the  Charter,  the  so-called  "pay-as-you-go"  Law,  Ch.  589  of  the 
Laws  of  1916  and  above,  p.  209. 

*  Tlik  refen  to  the  lidbyor's  veto  idudi  has  onoe  been  abolidied  by  the  Home 
Rnie  AflMDidBMnt* 


332 


Nbw  Yobx  Crrr's  Financbs  and 


fair,  but  poiiited  out  some  few  cases  of  unfair  taxation.  It  reooin- 
mended  that  certain  state  levies  be  shared  with  cities  or  counties,  for 

example,  the  automobile  tax  (with  the  restriction  that  it  be  spent  on 
roads).  The  committee  also  presented  various  bills:  charging  the 
state  with  the  regulative  expenses  of  the  Public  Service  Commission  of 
the  First  District;  prohibiting  further  construction  by  the  state  of 
roads  in  cities  and  prohibiting  the  maintenance  of  county  roads  by  the 
state;  providing  for  the  taking  over  of  the  dt^B  normal  schools  the 
state;  and  requiring  that  any  additional  excise  tax  be  divided  between 
the  state  and  the  city. 

The  committee  estimated  that  its  proposals  might  save  the  city  over 
$10,000,000.  Further  savings  would  be  possible  if  the  Board  of  Esti- 
mate were  given  broad  powers  to  consolidate  and  abolish  departments. 
The  administrative  expenses  of  the  city  could  be  reduced  without  kssenr 
ing  of  public  services.  The  ccmunittee  reocMnmended  that  the  p^iaon 
systems  be  revised  and  placed  on  a  uniform  basis. 

There  was  also  a  minority  report  signed  by  Robert  F.  Wagner,  Thomas 
H.  Cullen  and  Alfred  E.  Smith  proposing: 

1.  Constitutional  amendments  providing  for  two-thirds  vote  upon  aU 
i4>propriations  where  benefits  sou^t  were  chiefly  local,  and  giving  New 
York  City  representation  in  the  State  legislaturo  sufficient  to  protect  a 
majority  of  the  population  of  the  state  from  finandal  domination  of  the 
minority. 

2.  Legislation  repealing  the  state  aid  law; 

3.  Exemption  of  state  property  from  taxation  wherever  located; 

4.  Allowance  to  New  York  City  of  its  proportionate  share  of  state 
hi^way  expenditures;  and  apportioimient  of  proceeds  of  stock  transfer 
tax  to  the  localities  whero  the  tax  is  collected. 

Mitchel,  John  Purroy,  "Reducing  the  City's  Tbx  Rate."  New  York 
State  Chamber  of  Commerce  BvUetin.    (Felmiary,  1916,  pp.  29-37). 

Points  out  limited  jurisdiction  of  the  Mayor  and  the  Board  of  Esti- 
mate over  finances.  Discusses  the  financial  relation  of  Board  of  Educa- 
tion to  the  city  government  and  recommends  greater  control  over  educa- 
tional and  other  mandatory  expenditures,  particularly  county  eiqienses, 
70  per  cent,  of  which  are  mandatory. 

The  ev^tual  effects  of  the  "pay-achyou-go"  policy  are  considered. 

The  Mayor  asked  that  the  state  share  the  cost  of  vocational  and 
industrial  education,  as  in  other  cities;  that  the  state  bear  the  expenses 
of  the  Public  Service  Commission  of  the  First  District  (as  it  did  of  the 


Financial  Administration:  Appendix  M  333 


Second) ;  that  the  state  government  turn  over  the  stock  transfer  tax  to 
city,  and  that  sixty-five  per  cent,  of  the  automobile  tax  collected  in  New 
York  City  be  given  to  the  city.  These  and  other  changes  would  inTolve 
the  saving  of  313^  points  on  Ihe  tax  rato. 

He  proposed  further  to  give  Board  of  Estimate  absolute  control  over 
every  expenditure  made  out  of  the  New  York  City  treasury  and  over 
the  number  and  salaries  of  all  employees,  and  jurisdiction  over  the 
construction  forces  of  the  Public  Service  Conmiission  (since  attained 
by  the  creation  of  the  Board  of  Transqsortation).  He  also  recommended 
that  a  Board  of  Purchases  be  creat^,  that  the  dty  be  pymt  finandal 
control  over  the  Board  of  Water  Supply  and  that  the  Board  be  sup- 
planted by  a  single  commissioner;  that  a  single  Commissioner  of  Ac- 
counts be  authorized  as  an  aid  to  the  Mayor;  and  that  the  Board  of 
Education  be  made  smaller. 

Baoort  an  ihe  Tax  Levies  of  the  City  of  New  York,  189^  Bureau  of 
Municipal  Ibivestigation  and  Statistics,  Finance  Depariment  (1916, 
103  pp.). 

(1)  Considers  the  productivity  <^  each  dass  of  taxes,  the  probaMe  pro- 
portion of  receipts  from  current  and  prior  levies  within  particular  periods 

after  imposition,  the  relative  productivity  of  the  several  boroughs,  and 

(2)  The  extent  of  probable  deficiencies  or  losses  through  discounts 
and  remissions  and  the  cancellations  of  invalid  or  uncollectible  taxes, 
especially  marked  in  personal  property  tax. 

Report  on  the  Apportionment  of  Direct  State  Tax,  Bureau  of  Municipal 
Livestigation  and  Statistics,  Finance  Department.  (1917,  27  pp.). 

Summarizes  results  of  several  investigations  made  for  the  purpose  of 
determining  the  relation  between  actual  assessment  standards  and  the 
rates  of  equaUzation  fixed  for  certain  counties  outside  the  City  of  New 
York,  as  a  result  of  which  the  city's  share  of  taxes  to  be  paid  the  State 
was  reduced  from  69.27  per  cent,  in  1914  to  64.81  per  c^t.  in  1917,  at  a 
saving  of  over  $500,000. 

He  proposed  to  reduce  the  State  Board  of  Estimate  and  Equalisation 
to  three  members. 

Report  of  Mayor^s  Committee  on  Taxation  and  Inveetigatian  of  Mortgage 

Loans,  1918-1919,   (86  pp.). 

Recommendations  to  alleviate  tax  burden  on  real  estate. 

1.  Abolish  courthouse  board  and  remodel  old  courthouse. 

2.  Sell,  if  possible,  or  lease  all  unused  property  of  city. 

3.  Impose  moderate  yeaily  hcense  on  aU  prolesBkmal  and  iHisines^ 
men  in  city. 


334 


New  York  City's  Finances  and 


4.  Investigate  dock  rentals;  all  leases  or  right  with  regard  to  water- 
front privileges  should  be  sold. 

5.  Consolidate  all  dty  departments  affectiiig  real  estate;  merge 
iiie  I^ir^tion  Bureau  and  Tenonent  House  DepartD^ 
Building  Department. 

6.  Transfer  Building  Bureau  and  architectural  staff  of  Board  of 
Education  to  supervision  of  Building  Department. 

7.  B^move  pushcarts  from  streets  or  prevent  them'from'inteifeiv 
ing  with  renting  cxf  stores. 

8.  Substitute  income  tax  for  unsatisfactory  personal  property 
tax;  suggesting  rates  of  }^  of  1  per  cent.,  on  incomes  of  mforied 
persons  amounting  to  $1,200  or  more;  of  1  per  cent.,  on 
unmarried  persons;  1  per  cent,  on  incomes  of  $10,000  or  more, 
with  2  per  cent,  for  unmarried  persons. 

9.  Impose  annual  fee  on  all  horse  and  motor  trucks  and  auto- 
mobiles by  weight. 

10.  Tax  all  real  estate  belonging  to  churches  and  charitable  institu- 
tions and  not  used  by  them  as  such. 

Fwiher  BecommendaHans  Rdatim  to  TVmfton 

1.  Amend  the  Personal  Property  Tax  Law. 

2.  Amend  the  franchise  tax  on  mercantile  and  manufacturing 
corporations,  increadng  rate  from  3  to  16  per  cent.,  to  be  shared 
equally  by  city  and  state. 

3.  Amend  Greater  New  York  Charter: 

To  provide  for  limitation  of  tax  on  real  estate  of  2  per  cent., 
effective  January  1,  1922. 

To  reduce  tax  on  personal  property  to  }^  of  1  per  cent. 
To  compel  all  taxpayers  having  personal  property  of  more 
than  $2|000  to  file  reports  with  Deportment  of  Taxes,  under 
oath. 

4.  Tax  all  insurance  companies  ^  of  1  per  cent. 

5.  Tax  all  bank  deposits  1  per  cent. 

Report  of  the  Joint  Legislatwe  Committee  to  Investigate  the  Finances  of 
the  City  of  New  York,  Schuyler  M.  Meyer,  Chairman,  March  9,  1922, 
(58  pp.). 

B^commendations : 

1.  Change  tax  dates  gradually  to  January  1  and  July  1. 

2.  Restore  "pay-as-you-go"  system  as  enacted  in  1916. 


Financial  Administration:  Appendix  M  335 


3.  Abolish  Sinking  Fund  Commission  and  sinking  funds  as  laindly 

as  practicable. 

4.  Bepeal  General  Fund  Bond  provision  and  apply  all  sinking  fund 
receipts  to  payment  of  interest  and  reduction  of  city  debt;  devote 
revenues  of  income-paying  properties  to  debts  created  by  acquisi- 
tion of  properties. 

5.  Place  mum'cipal  public  utilities  on  self-sustaining  and  indepen- 
dent basis,  with  separate  profit  and  loss  accounts. 

6.  Place  payments  on  an  actuarial  basis  on  tma^ng  debts,  and 
employ  serial  bonds  for  new  debt. 

Report  of  Special  Joint  Committee  on  Taxation  and  Retrenchmmt  New 
York  State  Legislature  (1925,  259  pp.),  Thomas  I.  Sheridan,  Chair- 
man. 

Smnmary  of  findings  and  recommendations: 

(1)  Local  taxation.  Suggests  putting  municipal  utilities  on  sdf- 
sustaixung  basis  and  making  special  services  (building,  plumbing,  elec- 
trical inE^)ections  and  permits)  bear  their  own  cost.  Recommends 
revision  of  schedule  of  charges  for  all  permits,  licenses  and  fees. 

Proposes  that  the  new  state  taxes  necessary  be  distributed  among 
cities;  that  a  business  or  occupational  tax  be  levied  on  rental  value  of 

premises  occupied,  and  that  a  soiaU  surtax  be  ackled  to  the  itete  inco^ 
tax. 

1(2)  Revision  of  state  tax  system. 
Recommends: 

A  gasoline  tax  of  two  cents  per  gallon  to  be  shared  with  localities;  a 
tax  of  5  per  cent,  on  net  income  of  unincorporated  businesses  to  balance 

tax  upon  corporations; 

Revision  of  state  inheritance  tax  to  take  full  advantaip  of  federal 

credits; 

Abandonment  of  real  estate  to  dties  as  tax  source;  repeal  of  tax  on 
tangible  personal  property;  increase  of  income  tax  on  business  corpora- 
tions to  6  per  cent. 


APPENDIX  N 

Funded  Indebtednuss  and  Af^^-^^  Valuations  of  Real  Estate 
OF  THE  City  op  New  York  from  1830  to 

(In  thousands  of  dollars) 


Tbab  Ending 

DaOUiBBB  3l8T 


(1) 
1830 

1831 

1832 

1833 

1834 

1835 
1836 
1837 
1838 
1839 

1840 
1841 
1842 
1843 
1844 

1845 

1846 
1847 
1848 
1849 

1850 
1851 
1852 
1853 
1854 

1855 
1856 
1867 

1858 
1859 

1860 
1861 
1862 
1863 
1864 


Total  Fumbbd 


(2) 
;  570 
500 
500 
500 
500 

1,500 
2,939 
3,399 
5,035 
7,716 

10,842 
12,681 
14,096 
14,334 
14,477 

14,657 
14,830 
14,851 
15,016 
15,241 

15,037 
15,288 
14,945 
15,196 
15,214 

16,004 
16,033 

18,175 

18,321 
18,900 

22,203 
24,268 
28,068 
34,170 
41,880 


Sinking  Fund 


(3) 
227 
257 
398 
206 
254 

261 
340 
382 


618 


831 

1,018 
1,266 
1,500 

2,065 

2,285 
2,485 
2,994 
3,690 

3,583 
4,052 
3,896 
4,631 
5,171 

5,594 

4,936 

5,093 
5,277 
6,364 

5,107 
6,262 
7,233 
7,985 
8,767 

56 


Net  Fundbd 
Dsbt' 

Assessed  Valuation 
or  Real  Ebvatb* 

(4) 
$  343 
243 
102 
294 
246 

(5) 
9  o7,oUo 
95,594 
104,160 
114,124 
123,249 

1,239 
2,599 
3,017 
4,672 
7,098 

1  AO  TOO 

14(5,7oZ 
233,742 
196,450 
194,543 
196,940 

10,143 
11,850 

13,073 
13,068 
12,977 

186,351 
176,513 
164,955 
171,937 

12,592 
12,545 
12,366 
12,022 
11,561 

177,207 
183,480 
187,315 
193,029 
197,741 

11,454 
11,236 
11,049 
10,565 
10,043 

207,142 
227,015 
253,273 
294,652 
330,564 

10,410 

11,097 
13,082 
13,044 
12,536 

336,975 

340,972 
352,343 
368,346 
378,051 

17,033 
18,006 
20,835 
26,185 
33,113 

398,533 
406,881 
400,239 
402,196 
410,695 

Financial  Administration:  Appendix  N 


337 


Funded  Indebtedness  and  Valuation— Cow^mw^d 


Yeab  Ending 
Dbcsmbbb  3l8T 

Total  Pcnded 
Dbbx> 

Sinking  Fund 
A«UBra> 

Net  Funded 
Debt* 

Assessed  Valuation 

OP  Real  Estate* 

(1) 

1865 

1866 
1867 
1868 
1869 

(2) 
$43,366 
44,191 

46,501 
48,981 
63,626 

(3) 
S  9,669 
11,229 
13,985 
16  501 
18,321 

(4) 
$33,697 
32,962 
32,516 

32  480 

45,305 

(5) 
$427,404 
478,994 

555,442 

684,123 

1870 
1871 
1872 
1873 
1874 

79,523 
102,182 
110,700 
121  41Q 

139,098 

18,115 
20,182 
23,348 

94.  R4.1 

26,823 

61,408 
82,000 
87,352 

»70,0<  o 

112,275 

742,103 

769,306 
797,125 
o«5o,oyi 
881,547 

1875 
1876 
1877 
1878 
1879 

140,378 
142,002 
142,769 
130  600 

136,407 

27,748 
28,296 
31,120 

«M,A^BO 

33,021 

112,630 
113,706 
111,649 

ItVT  AOA 
XV/  f^X/O 

103,386 

883,643 
892,428 
895,063 

918,134 

1880 
1881 

1882 

1883 
1884 

133,534 
134.400 

130,474 
130,680 
126,870 

32,993 
36  110 

34,332 
38,134 
34,823 

100,541 
08  200 

96,142 
92,546 
92,047 

942,571 
V#D,#oO 

1,035,203 
1,079,130 
1,119,761 

1885 
1886 
1887 
1888 
1889 

125,475 
125,982 
128,268 
132,445 
141,839 

36,113 
41,205 
39,521 
44,324 
45,638 

89,362 
84,777 
88,747 
88,121 
96,201 

1,168,443 
1,203,941 
1,254,491 
1,302,818 
1,331,578 

1890 
1891 
1892 
1893 
1894 

146,371 
150,298 
155,161 
166,460 
173,991 

48,513 
52,783 
56,532 
65,708 
69,912 

97,858 
97,515 
98,629 
100,761 
104,079 

1,398,290 
1,464,247 
1,504,904 
1,562,582 
1,613,057 

1895 

1896 
1897 

185,588 
195,907 
223,007 

75,703 
77,630 
86,170 

109,885 
118,277 
136,847 

1,646,028 
1,731,509 
1,787,186 

1HB  consolidation  OF  GREATER  WKW  YORK  BECAME  EFFECTIVE 

JAMQART  I,  il^ 

1806 
1899 

341,844 
359,620 

104,478 
111,«SS2 

237,366 
248,196 

2,533,730» 
2,932,445 

1900 
1901 
1902 
1903 
1904 

384,794 
412,047 
434,339 

469,123 
534,954 

119,251 
125,524 
138,317 

142,762 
141,088 

265,543 
286,523 
296,022 
326,361 
393,861 

3,168,533 
3,237,778 
3,330,647 
4,751,550 
5,015,463 

338        Nsw  YoBK  City's  Financbs:  Appendix  N 


Funded  Indebtedness  and  Valuation— C^onttniied 


Ymmm  Ending 

DIMMBBB  3l8T 

Total  Fpkpm) 
Dm' 

Sinking 
Funds  Abbxtb' 

Net  Fundbd 

DXBT* 

Assessed  Valttation 
or  RsAii  Estate* 

(1) 

1905 
1906 

1907 
1908 
1909 

(2) 
$565,056 
617,484 

672,396 
730,691 
794,930 

(3) 
$141,545 
153,467 

146,335 
145,000 
151,259 

(4) 
$423,510 
464,017 

526,061 
585,691 
643,670 

(5) 

$5,221,582 
5,738,487 
6,240,480 
6,722,415 
6,807,179 

1910 
1911 
1912 
1913 
1914 

843,503 
917,811 
985,190 
1,065,373 
1,124,020 

155,469 
161,040 
165,125 
173,201 
181,816 

688,033 
756,771 
820,064 
892,172 
942,204 

7,044.192 
7,858,840 
7,861,898 
8,006,647 
8,049,859 

1915 
1916 
1917 
1918 
1919 

1,155,483 
1,191,317 
l,214,9i8 
1,225,095 
1,238,260 

181,749 
183,822 
194,466 
199,078 
210,449 

973,734 
1,007,495 
1,020,481 
1,026,017 
1,027,811 

8,109,760 
8,207,822 
8,254,549 
8,339,638 
8,428,322 

1920 
1921 
1922 
1923 
1924 

1,246,858 
1,292,973 
1,316,160 
1,373,350 
1,459,589 

215,660 
228,450 
230,563 
243,509 
257,098 

l,a31,198 
1,064,522 
1,085,596 
1,129,841 
1,202,490 

8,626,192 
9,972,985 
10,2^,995 
10,596,066 
11,148,811 

1925 
1926 

1,565,853 
1,660,993 

274,329 
294,405 

1,291,524 
1,366,588 

11,901,348 
12,997,580 

*  Including  Assessment  Bonds,  excluding  Revenue  Bonds,  Special  Revenue  Bonds, 
and  General  Fund  Bonds,  the  latter  of  which  were  first  issued  in  1903.  The  figures 
for  tlie  yma  1830-1897  aie  oomputed  from  the  figures  given  in  E.  D.  Durand's 
Fimmeet  ef  the  CUu  of  New  York,  1898,  p.  374;  for  the  yeww  1898-1910,  from  Gbmp- 
troller  Prendergast's  The  Business  of  the  City  of  New  York,  How  lite  CUif  OeU  lie 
Money  and  How  It  Spends  It,  October  10,  1911. 

«  Exclusive  of  General  Fund  Bonds.  The  figures  in  Column  3  are  taken  for  the 
years  1830-1897  from  Durand,  op.  cit.;  for  the  years  1901  and  1905,  and  1909-1926, 
from  the  Comptroller's  Annual  Report,  1926,  p.  372.  The  intervening  years  are 
takm  txom  the  OomptroUer's  Annual  Reports  for  those  years. 

*  Cmnputed  from  the  figures  in  Cohmms  2  and  3. 

*  The  figures  for  the  years  1830-1852  taken  from  the  ComptroOei's  Report,  1862, 
p.  68;  1854-1860,  from  the  Comptroller'e  Report,  1859,  p.  164;  for  the  years 
1865-1871,  from  the  Commission  of  Taxes  and  Assessments  Report,  1873,  p.  15; 
those  for  the  years  1878-1896  from  the  Report  of  the  Commiseion  af  Taxes  and 
Assessments,  1896,  p.  17;  those  for  the  years  1899-1925  from  the  Report  of  the 
Department  of  Taxee  and  Assessments,  1925;  those  for  the  intervening  years,  from 
the  ComptroDer's  Annual  Reports  for  those  yem, 

*  AflnnmeatB  of  ^ooUj^,  Queens,  and  Bidimo^ 


APPENDIX  O 


CommmmvAL  Dnr  and  Tax  Limits  Impobsd  on  Cmss  in 

New  Yobk  State 

Showing  the  dates  of  approval  by  the  people  of  the  State  of  the  various  clauses 
(Matter  in  brackets  []  is  no  longer  in  force;  mattor  in  italics  legmemtB  additixms  to 
preexisting  text.) 

DM  Limit.  Article  VIII.   §  11  [Now  numbered  §  10].  No 

1884  county,  city,  town  or  village  shall  hereafter  give  any  money  or 
proper^,  or  loan  its  money  or  credit  to  or  in  aid  of  any  indi- 
vidual, association,  or  corporation,  or  become  directly  or  indi- 
rectly the  owner  of  stock  in,  or  bonds  of,  any  association  or 
corporation;  nor  shall  any  such  county,  city,  town  or  village  be 
allowed  to  incur  any  indebtedness  except  for  county,  city,  town 
or  village  purpc^.  This  section  shall  not  prevent  such  county, 
city,  town  or  village  from  making  such  provision  for  the  aid  or 
support  of  its  poor  as  may  be  authorized  by  law.   No  county 

1899  [containing  a]  or  city  [of  over  one  hundred  thousand  inhabit- 
ants or  any  such  city] 

1884  shall  be  allowed  to  become  indebted  for 

any  purpose  or  in  any  manner  to  an  amount  which,  including 
existing  indebtedness,  shall  exceed  ten  per  centum  of  the  assessed 
valuation  of  the  real  estate  of  such  county  or  city  subject  to 
taxation,  as  it  appeared  by  the  assessment  rolls  of  said  county 
or  city  on  the  last  assessment  for  state  or  county  taxes  prior  to 
the  incurring  of  such  indebtedness;  and  all  indebtedness  in  ex- 
cess of  such  Hmitation  except  such  as  now  may  exist,  shall  be 
absolutely  void,  except  as  herein  otherwise  provided.  No 

1899  [sudi  county  or  such] 

1884  city  whose  present  indebtedness  exceeds 

ten  per  centum  of  the  assessed  valuation  of  its  real  estate  su1>- 
ject  to  taxation,  shall  be  allowed  to  become  indebted  in  any 
further  amount  until  such  indebtedness  shall  be  reduced  within 
such  limit.  This  section  shall  not  be  construed  to  prevent  the 
isBuiiig  of  certificates  or  indebtedness  or  revenue  bonds  issued  in 
anticipation  of  the  collection  of  taxes  for  amounts  actually  con- 
tained, or  to  be  contained  in  the  taxes  for  the  year  when  such 
certificates  or  revenue  bonds  are  issued  and  payable  out  of  such 
taxes. 

339 


340 


Nsw  YoBK  Cmr's  Finances  and 


1909  ;  nor  to  prevent  the  city  of  New  Yoik  horn  issuing  bonds 

to  be  redeemed  out  of  the  tax  levy  for  the  year  next  succeeding 
the  year  of  their  issue,  provided  that  the  amount  of  such  honda 
whidi  may  be  issued  in  any  one  year  in  excess  of  the  hmitations 
herein  contained  shall  not  exceed  one-tenth  of  one  per  centum 
of  the  assessed  valuation  of  the  real  estate  of  said  aty  subject 
to  taxation. 

1884  Nor  shall  this  section  be  construed  to  prevent  the 

issue  of  bonds  to  provide  for  the  supply  of  water;  but  the  term 
of  the  bonds  issued  to  provide  the  supply  of  water, 

1909  in  excess  of  the 

limitation  of  indebtedness  fixed  herein, 

shall  not  e3Coeed  twenty 
years,  and  a  sinking  fund  shall  be  created  on  the  issuing  of  the 
said  bonds  for  their  redemption,  by  raising  annually  a  sum 
which  win  produce  an  amount  e^ual  to  the  sum  of  the  principal 
and  interest  oi  said  bonds  at  their  maturily . 
1899  All  certificates  of 

indebtedness  or  revenue  bonds  issued  in  anticipation  of  the  collec- 
tion of  taxes,  which  are  not  retired  within  five  years  after  their  date 
of  issue,  and  bonds  issued  to  provide  for  ^e  supply  of  water, 
and  any  debt  hereafter  incurred  by  any  portion  or  part  of  a  city 
if  there  shall  be  any  such  debt,  shall  be  included  in  ascertaining 
Hoe  power  of  the  city  to  become  otherwise  indebted; 

1905  except  that 
1917   debts  incurred  by  [the]  any  of  [New  York]  the  first  doss 

1906  after  the 
first  day  of  January,  nineteen  hundred  and  four,  and  debts  in- 
curred by  any  city  of  the  second  class  after  the  first  day  of  Janu- 
ary, nineteen  hundred  and  eight, 

1909  and  debts  incurred  by  any  city 

of  the  third  class  after  the  first  of  January  nineteen  hundred  and 
ten, 

1905        to  provide  for  ibe  supply  of  water  shall  not  be  included; 

1909  and  except  further  that  an^  debt  hereafter  incurred  by  the  city 
of  New  York  for  a  public  improvement  owned  or  to  be  owned 
by  tiie  dty,  which  yields  to  tiie  city  current  net  revenue,  after 
fnitldng  any  necessary  allowance  for  repairs  and  maintenance  for 
which  the  city  is  liable,  in  excess  of  the  interest  on  said  debt 
and  of  the  annual  installments  necessary  for  its  amortization 
may  be  excluded  in  ascertaining  the  power  of  said  city  to  be- 
come otherwise  indebted,  provided  that  a  sinking  fund  for  its 
amortization  shall  have  been  established  and  maintained  and 
that  the  indebtedness  shall  not  be  excluded  during  any  period 
of  time  when  the  revenue  aforesaid  shall  not  be  sufficient  to 
equal  the  said  interest  and  amortization  installments,  and  ex- 
cept further  that  any  indebtedness  heretofore  incurred  by  the 
city  of  New  York  for  any  rapid  transit  or  dock  investment  may 


Financial  Administration:  Appendix  O  341 


be  so  excluded  proportionately  to  the  extent  to  which  the  cur- 
rent net  revenue  received  by  said  city  therefrom  shall  meet  the 
interest  and  amortization  installments  thereof,  provided  that 
any  increase  in  the  debt  incurring  power  of  the  city  of  New 
York  which  shall  result  from  the  exclusion  of  debts  heretofore 
incurred  shall  be  avilable  only  for  the  acquisition  or  construction 
of  properties  to  be  used  for  rapid  transit  or  dock  purposes.  The 
Legislature  shall  prescribe  the  method  by  which  and  the  terms 
and  conditions  under  which  the  amount  of  any  debt  to  be  so 
eacduded  shall  be  detennined,  and  no  such  debt  shall  be  ex- 
chided  except  in  accordance  with  the  detennination  so  i»e- 
Bcribed.  The  Legislature  may  in  its  discretion  confer  appropri- 
ate jurisdiction  on  the  Appellate  Division  of  the  Supreme  Court 
in  the  first  judicial  department  for  the  purpose  of  determining  the 
amount  of  any  debt  to  be  so  excluded.  No  indebtedness  of  a  city 
valid  at  the  time  of  its  inception  shall  thereafter  become  in- 
valid by  reason  of  the  operation  of  any  of  the  provisions  ci  this 
section. 

1899  Whenever  the  boundaries  of  any  city  are  the  same  as 

those  of  a  county,  or  when  any  city  shall  include  within  its 
boundaries  more  than  one  county,  the  power  of  any  county 
wholly  included  within  such  city  to  become  indebted  shall  cease, 
but  the  debt  of  the  county,  heretofore  existing,  shall  not,  for 
the  purposes  of  this  section,  be  reckoned  as  a  part  of  the  city  debt. 

1884  Tax  Limit.  The  amount  hereafter  to  be  raised  by  tax  for 
county  or  city  purposes,  in  any  county  containing  a  city  of  over 
one  hundred  thousand  inhabitants,  or  any  such  city  of  this 
State,  in  addition  to  providing  for  the  principal  and  interest  of 
existing  debt,  shall  not  in  the  aggregate  exceed  in  any  one  year 
two  per  centum  of  the  assessed  valuation  of  the  real  and  per- 
sonal estate  of  such  county  or  city,  to  be  ascertained  as  prescribed 
in  this  sectioii  in  req)ect  to  county  or  dty  debt. 


Financial  Aouinistbation:  Appbndiz  P 


343 


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APPENDIX  Q 


CoiiPAB^TEVS  Tables  of  the  Finances  of  the  Ten  Largest 

CrnES  IN  THE  United  States^ 


Cirr 

Amma  (Acrw) 

Ann  HUH  lilt 
YALUAnOM 

Cafita 

New  York  .... 

5,877,251 

191,360.0 

$12,944,481,493 

$2202 

Chicago  

2,995,239 

125,430.2 

1,873,921,764 

625 

Philadelphia  .    .    .  . 

1,979,364 

81,920.0 

3,967,810,352 

2004 

Detimt    .    .    •    .  • 

1,218,069 

76,245.4 

2,757,664,010 

2263 

Cki^ntaod  .... 

936,485 

43,929.0 

2,168,243,440 

2315 

St.  Louis  

814,909 

39,040.0 

1,194,633,020 

1465 

Baltimore     •    •    •  . 

796,296 

50,560.0 

1,476,386,372 

1854 

Boston  

781,622 

27,634.8 

1,862,799,900 

2383 

Los  Angeles  .... 

900,000* 

262,896.0 

1,374,750,565 

1545 

Pittsburgh  .... 

031,563 

30,035.2 

1,014,116,820 

1605 

» From  Financial  StaUtUa  qf  Cities  (U.  S.  Bureau  of  the  Census,  1926). 
>  Estimated. 


New  York 
Chicago  . 
Philadeli^ 
Detroit 

Cleveland 
St.  Louis  . 
Baltimore 
Boston 
Los  Angeles 
Fittiburgh 


Nn  Baonrai 


$438,991,198 
202,830,098 
107,000,220 
107,362,534 
65,514,302 
39,262,138 
37,240,947 
68,114,642 
103,971,340 
42,367,132 


Per 
Cakta 


$74.69 
67.71 
54.05 

88.14 
69.95 
48.17 
46.76 
87.14 
115.52 
67.08 


CoBT  or 


$523,756,518 
223,724,124 
165,247,709 
123,956,775 
80,445,651 
44,647,750 
48,019,840 
73,066,363 
129,584,638 
48^1,728 


Pbb 
Carta 


$65.75 
46.13 

47.19 
64.06 
53.04 
38.69 
40.35 
72.16 
143.96 
57.06 


344 


Financial  Administration:  Appendix  Q  345 


Oat 

Tazm  Imwod 

Tax 
Ratk 

Pkb 
Capita 

Nn  Uwmr 

Pkb 
CAncA 

New  York   .  . 

$327,951,701 

25.33 

$55.80 

$1,250,438,056 

$212.76 

Chicago  .    .  . 

167,981,958 

89.72 

56.08 

176,597,810 

58.96 

Philadelphia 

84,727,392 

21.35 

42.81 

300,166,122 

151.65 

Detroit  .    .  . 

69,842,204 

25.32 

57.34 

176,516,040 

144.91 

Cleveland    .  . 

60,649,517 

23.36 

54.08 

132,645,624 

141.64 

St.  Louis 

27,938,245 

23.39 

34.28 

22,931,592 

28.14 

Baltimore 

29,928,177 

20.53 

37.58 

101,343,043 

127.27 

Boston   .    .  . 

49,736,757 

26.70 

63.63 

94,033,129 

120.31 

Lob  Angeles  .  . 

53,549,928 

38.95 

59.49 

159,162,949 

176.84 

Pittsburgh  .  . 

36,722,409 

34.47 

58.15 

87,688»291 

138.68 

Revenue  Eeceipts 


Cirr 

Total 

Gnnnui. 

Pbopertt 
Tax 

%  OF 

Total 

Special 
Tazbs 

%  OF 

Total 

New  York  . 

$464,535,361 

$305,605,029 

65.7 

$26,861,072 

05.7 

Chicago  . 

205,024,118 

130,932,953 

63.8 

97,182 

00.04 

Philadelphia 

110,167,284 

76,563,248 

69.4 

62,512 1 

00.05 

Detroit  . 

108,118,958 

58,283,628 

53.9 

902,295 

00.8 

Cleveland 

66,823,335 

45,042,495 

67.4 

285,951 

00.4 

St.  Louis 

39,606,691 

25,666,998 

64.8 

BsUliiMire 

38,368,333 

26,681,309 

69.5 

652,956 

01.7 

48,259,855 

/  6,965,676 
\    337,721 1 

10.0  \ 

Boston   .  . 

69,649,744 

00.4  / 

Los  Angeles 

106,672,005 

56,057,559 

52.5 

Pittsburgh  . 

42,720,154 

33,759,168 

79.0 

249,769 1 

00.5 

Business 

AND  NON- 

BusnraM 
LicBinn 


$14,393,135 
8,047,413 
1,554,961 
1,281,274 
1,383,783 
2,766,943 
1,350,924 

480,672 

3,937,870 
561,406 


» PoU  Tax 


CiTT 

%  OF 

Total 

Spbcial 
Aammntmtm 

%  of 
Total 

Fines, 
Fobfeits 

AMD  EaCHBATS 

%  OF 

Total 

StIBVBNTIONS 
AND  GbANTB 
AMD  DOMATIOm 

New  Yoik  . 

03.0 

$13,940,324 

03.0 

$2,441,563 

00.5 

$28,323,652 

Chicago  .  . 

03.9 

28,074,695 

13.6 

1,349,402 

00.6 

5,378,875 

Philadelphia 

01.4 

1,020,887 

00.9 

141,977 

00.1 

3,150,912 

Detroit  . 

01.1 

8,399,906 

07.7 

659,274 

00.6 

4,494,308 

Cleveland 

02.0 

5,325,269 

07.9 

625,587 

00.9 

490,058 

St.  Louis 

06.9 

2,860,302 

07.2 

160,868 

00.4 

988,456 

Baltimore  . 

03.5 

1,074,607 

02.8 

29,876 

00.07 

1,107,229 

Boston  .  . 

00.6 

550,632 

00.7 

391,384 

00.5 

782,105 

Los  Angeies 

03.6 

17,907,084 

16.7 

1,328,979 

01.2 

3,732,809 

Fittsbiuji^  . 

01.3 

776,395 

01.8 

351,475 

00.8 

1,160,017 

346 


New  York  City^s  Finances  and 


Cm 

%  OF 

Total 

HXOHWAT 

Rents  and 

Interest 

%  OF 

Total 

Earnings 
OF  Gbnksal 
Dbftb. 

%  OF 

Total 

Eaxninos  of 
Pttbuc 

Service 
Enterprises 

%m 

TOKAL 

New  York  . 

06.0 

$34,351,452 

07.3 

$5,431,998 

01.1 

$33,187,136 

07.1 

Chicago 

02.6 

13,044,991 

06.3 

7,168,474 

03.4 

10,930,133 

05.3 

Philadelphia 

02.8 

16,156,830 

14.6 

4,133,143 

03.7 

7,382,814 

06.7 

Detroit 

(H.1 

1,350,295 

01.2 

3,895,851 

03.5 

28,852,127 

26.6 

Qevdand  . 

00.7 

2,675,861 

04.0 

2,660,712 

03.9 

8,343,619 

12.4 

St.  Louis 

02.4 

2,389,752 

06.0 

1,258,354 

03.1 

3,515,018 

08.8 

Baltimoie  . 

02.8 

2,904,607 

07.5 

502,368 

01.3 

4,055,457 

10.5 

Boston  . 

01.1 

5,213,967 

07.4 

2,423,254 

03.4 

4,244,478 

06.0 

Los  Angeles 

03.4 

2,673,939 

02.5 

2,694,357 

02.7 

18,339,408 

17.1 

Pittsburgh  . 

02.7 

1,837,243 

04.3 

1,098,013 

02.5 

2,917,668 

06.8 

Cm 

Total 

QSNBRAL 

PMTBOnOlf  10 

Person  Ain> 
Fbopsbtt 

New  York  

$295,464,720 

$30,506,488 

$57,016,718 

Chicago  

120,289,622 

12,401,779 

23,555,175 

Philadelphia  

77,370,593 

8,284,989 

15,764,179 

Detroit  

48,375,999 

3,813,397 

11,125,678 

Caevdand  

37,143,189 

3,412,217 

6,004,150 

St  hom  ...... 

27,916,839 

2,876,019 

6,792,046 

Baltimore  

25,106,259 

1,736,905 

6,404,386 

Boston 

45,764,065 

4,161,937 

9,036,812 

Los  Angeles  

47,256,777 

4,364,186 

9,023,611 

Pittsburgh     .    .    .    .  . 

29,968,106 

3,619,001 

4,827,382 

Conservation 
or  HSAIAB 

Samitatiom 

CHABITtM, 

Hospitals  and 

Corrections 

New  York 

$5,117,815 

$26,547,487 

$22,623,173 

$18,835,392 

Chicago  . 

3,572,272 

12,616,970 

8,150,732 

5,776,688 

Philadelphia  . 

1,218,986 

7,174,641 
3,627,903 

4,964,444 

6,182,902 
3,688,008 

Detroit    .    .  . 

1,859,659 
1,226,451 

3,892,919 

2,965,314 

CleTdaiid     .  . 

2,596,039 

2,002,674 

St.  Louis  .    .  . 

739,664 

1,565,287 

2,618,161 

2,650,414 

Baltimore 

574,045 

2,257,851 

3,120,198 

1,600,654 

Boeton     .  . 

1,213,872 

3,805,060 

3,088,550 

4,350,571 

Los  Angeles  . 

1,208,975 

1,601,873 

4,619,368 
3,493,741 

3,209,021 
2,089,893 

Pittsburgh 

669,801 

2,674,088 

Financial  Administration  :  Apfindix  Q  347 


Citt 

Educattok 

Rbcbbatioh 

MutCnXANSOUB 

IxmuwT 

New  York    .  . 

$104,776,966 

$6,340,679 

$21,627,585 

$76,781,588 

Chicago        .  . 

40,505,403 

5,889,659 

6,181,076 

11,199,006 

Philadelphia  .  . 

22,357,448 

2,940,674 

7,726,596 

13,130,038 

Detroit 

14,884,501 

2,127,167 

2,087,517 

9,742,468 

Qeveland     .  . 

14,596,907 

555,001 

2,110,573 

8,484,917 

St.  Louis  .    .  . 

8,603,909 

1,269,484 

435,182 

1,288,744 

Baltimore     .  . 

7,282,113 

1,010,049 

835,636 

5,405,920 

Boston 

13,813,945 

2,453,964 

3,002,285 

7,997,186 

Los  Angeles  . 

20,292,640 

851,657 

725,320 

6,483,105 

Pittsbuiigh    .  . 

10,170,377 

628,696 

1,229,052 

4,273,616 

APPENDIX  R 


FUTDBB  COUBSE  OF  ASSESSED  VALITAtlOlfB 

To  ascertain  the  character  of  the  general  trend  of  real  estate 
yaluatioiis  and  to  study  the  estimates  in  the  Board  of  Transpor- 

TABLE  I 

Ammm  ViLim  and  Fdu.  Value  of  Taxamm  Rbal  EafXAin,  188S-1028 


1898  

1899  

1900  

1901  

1902  

1903  

1904  

1905.  •  *  •  • 
X906«  •  •  •  • 

1907  

1908  

1900*  '*  •  •  • 
1910..... 
1911....*. 

1912  

1913  

1914  

1915  

1916..... 

1917  

1918  

X9X0*  •  >  •  • 

1920  

1921  

1922  

1933..... 

1924  

1925  

1926  

1927  

1928  


Assessed  Value 
of  Taxable 
Real  Estate 


2,533.7 

2,932.4 
3,168.5 
3,237.8 
3,330.6 
4,751.6 
5,015.5 
5,221.6 
5,738.5 
6,240.5 
6,722.4 
6,807.2 
7,044.2 
7,858.8 
7,861.9 
8,006.6 
8,049.9 
8,109.8 
8^.8 
8,254.5 
8,339.6 
8,428.3 
8,626.2 
9,973.0 
10,250.0 
10,596.1 
11,148.8 
11,901.3 
12,997.6 
14,539.8 
15,845.5 


Annual  In- 
creases in 
Assessed  Val- 
ues of  Taxable 
Real  Estate 
in  1<HHf*>«w 


398.7 
236.1 
69.3 
92.8 
1^420.9 
264.0 
206.1 
516.9 
502.0 
481.9 
84.8 
237.0 
814.6 
3.1 
144.7 
43.3 
59.9 
96.0 
46.7 
85.1 
88.7 
197.9 
1,346.8 
277.0 
346.1 
562.7 
752.5 
1,096.3 
1,542.2 
1,305.7 


Assessed  Value 
of  Taxable 
Land  in 


Valne 

of  New  Build- 
ing Exempt 
until  1932  in 


3,740.1 

•    •    •  4 

4,082.6 

•    •    •  4 

4,325.1 

•    •    •  « 

4,666.3 

•  •  •  a 

3,915.6 

•  •  •  I 

4,033.7 

•  •  •  f 

4,642.2 

«  •  •  « 

4,650.9 

•  •  ■  < 

4,683.5 

•  •  •  « 

4,699.9 

•  •  •  • 

4,745.0 

•  •  «  • 

4,717.2 

•  ■  •  « 

4,670.2 

•  •  •  • 

4,660.0 

•  •  •  • 

4,665.3 

•  •  •  • 

4,722.8 

•  •  •  • 

5,044.0 

•  •  •  • 

3,099.9 

5,210.2 

248. 

5,443.0 

482. 

5,695.8 

804. 

6,213.3 

896. 

7,139.5 

917. 

7,748.3  2 

916. 

Full  Value  of 
Taxable  Real 
Estate  in 
Millions 


3,839 
4,312 
4,660 
4,762 
4,899 
5,384 
5,635 
6,867 
6,446 
7,011 
7,553 
7,648 
7,915 
8,636 
8,640 
8,799 
8,750 
8,721 
8,826 
8,876 
8,872 
8,966 
9,177 
10,610 
11,142 
11,909 
12,119 
12,938 
14,128 
15,804 
17,038 


^  Includes  Real  Estate  of  corporations  and  special  franchises. 
*  Rriiminary  figure. 


Financial  Administration:  Appendix  R  349 


tation  Report  ^  m  relationship  to  that  trend,  Diagrams  I  and  II 
were  prepared.  The  data  on  which  they  are  baaed  are  presented 
m  Table  I. 

Diagram  I  shows  the  variations  in  assessed  values  of  real  estate 
and  projects  the  line  to  show  the  course  of  the  Board's  estimates. 


DlAIBUlf  I 

Course  of  Assessed  Values  of  Real  Estate  Since  Consolidation  ^ 


4^ 

flUMMC  Ml 

1 

w  BuiUiac* 

lUll  E»U 

t*  AsMM«d^ 

Values 

/ 

1  1  1  1 

■till 

1  1  1  1 

.  .  .  , 

If 
It 

IT 
W 

a 

M 

.» 

"o 

O  » 


10 


IMS 


1  Equation  to  lines  of  best  fit.  Period  1898-1914,  y  -  5.55  +  0.38  «,  origm  1906, 
y  in  units  of  1  billion  dollars.  Period  1898-1928  (exclusive  d  1914-1921).  y  «  2.18 
+  0.35  Xf  origin  1897,  y  in  units  of  1  billion  dollars. 


lines  of  best  fit  are  inserted  to  indicate  the  general  tr^d.'  It 
is  obvious  that  in  recent  years  assessments  have  been  increasing 

at  an  unprecedented  rate.  The  main  cause  is  almost  certainly 
the  undersupply  of  buildings  accumulated  during  the  war  years. 
The  assessment  increase  has  come  chiefly  in  building  rather  than 

*  Communication  from  the  Board  of  Transportation  to  the  Board  of  Estimate 
and  Apportionment,  July  12,  1927. 

*  lines  descrilmig  the  aYoage  or  nomial  \aio%*saoit  \xmA  fitted  by  the  method  of 
least  equaies. 


350 


New  York  City's  Finances  and 


in  land  values.  In  1905  land  values  made  up  approximately 
three-fourths  of  the  assessment  rolL  Today  they  are  slii^tly 
less  than  one-half. 

The  question  is  this:  How  rapidly  is  the  curve  approaching  a 
point  when  the  abnormal  stimulus  of  the  starved  war  years  will 


DlAGBAM  II 

OocBSB  OP  Full  Values  of  Rial  Ebtaxb  Since  Consolidation  ^ 


FuUVilu 

e  of  Real 

Estate 

taeof  Ri 

tl  Estai 

1 

r 

1  1  1  1 

1  1.1..L 

1  1  1  1 

1  1  1  1 

1  1  1  1 

1  1  1  1 

1  1  1  1 

-J-l-l-L. 

till 

O 

o 


ltM19M 


1905 


1910 


1915 


1920 


1925 


1930 


195S 


1940 


194S 


*  Equation  to  line  of  best  fit.  Period  1898-1928,  log  y  =  0.91213  +  0.01764  9 
Qfigin  1913,  y  in  units  of  1  billion  dollars. 


disappear,  and  the  line  representing  the  assessed  values  again 
resume  a  more  normal  course?  It  is  true  that  for  the  last  cdght 
years  ^  (1921-1928)  the  avmge  annual  increment  has  been 

»This  was  a  penod  of  abnormally  high  prices  for  building  materials  and  high 
ousts  f<w  o(Histnictioii  woik.  This  accoimts  in  part  for  the  high  valuation  placed 
iqiontlievoliiiiieof  iiew  biiildiiig.  Should  geneiul  piioes  decraue  it  k  quite  possible 
that  biiilifingi  cfeeted  dnnog       pnoes  would  have  to  be  fevalned  on  a  lower 


Financial  Administration:  Appendix  R  351 


approximately  900  miUions;  but  in  the  preceding  seven  years 
(1914-1920)  the  average  increment  was  only  90  millions  a  year. 
In  a  more  normal  period  before  the  war  (1907-1913)  assessments 
showed  an  average  increase  of  325  millions  per  year.  Even  allow- 
ing for  the  increases  in  population  and  the  higher  costs  of  build- 
ing it  does  not  seem  likely  that  the  average  annual  increments 
will  be  much  over  400  millions  for  the  period  1928  to  1932. 
Increments  of  over  800  millions  have  been  recorded  only  six  times 
since  consoUdation. 

Diagram  II  affords  a  less  simple  but  more  accurate  basis  for 
forming  a  judgment  than  Diagram  I.  Plotted  on  logarithmic 
paper  and  based  on  full  values  rather  than  assessed  values  of 
real  estate/  the  line  of  trend  becomes  a  more  trustworthy  guide 
to  normal  future  developments.  From  this  chart  it  appears  that 
the  ''full  value''  of  taxable  real  property  has  been  above  the  cal- 
culated theoretical  long-time  normal  since  1926.  It  is  possible 
that  the  curve  of  full  valuations  will  continue  for  several  years 
(as  in  the  period  1906-1914)  above  the  ''normal."  As  yet  there 
is  no  indication  of  a  change  in  direction.  However,  it  does  not 
seem  likely  that  the  present  high  rate  of  increase  can  continue 
for  many  years  without  a  reaction  setting  in. 

The  evidence  of  this  chart  does  not  demonstrate,  of  course, 
unsoundness  in  the  estimates  of  the  Board  Transportation. 
There  is  a  fau:,  even  a  good  chance  that  they  will  be  justified 
by  the  event.  It  is  clear,  however,  that  they  do  not  err  in  the 
direction  of  conservatism. 

^  Full  values  form  a  bettor  basis  for  estimating  the  growth  of  zeal  estate  aa  the 
sate  of  aosesiimflnt  has  diaogad  ftequeiitly  in  the  past 


APPENDIX  8 


A  SELECTED  BIBLIOGRAFHY 

Prepared  by 

REBECCA  B.  RANKIN 
labrarian  of  the  New  York  Municipal  Reference  Libiaiy 


Finances  and  Fiscal  Policies 

Aeadmy  of  Political  Sd^oe  in  the  City  of  New  York.   The  Govemmeni 

of  the  City  of  New  York,  1915,  263  pp.  {Proceedings,  April  1915,  v. 
5,  No.  3). 

Advisory  Commission  on  Taxation  and  Finance,  New  York  City.  Report 
on  Taxation  and  Revenue.  1905. 

&iiafe,  Henry.  The  Cost  of  Gooemment  in  New  York  City.  A  discus- 
sion of  dty  busmess  for  taxpayers,  1913,  35  i^.  Reprinted  from 
Record  and  Chiide, 

Bureau  of  Municipal  Research,  New  York.   Financial  PrMeme  of  the 

City  of  New  York,    {Municipal  Research,  Bulletin  No.  69,  March 
1915,  pp.  199-210). 
  New  York  City^s  Department  of  Finance.   New  York,  1908.  254 

  Some  Bestdts  of  Central  Financial  Control  in  New  York  City. 

1917,  63  i^.   {Mmieipal  Reeeareh,  BuUeHn  No.  81). 
  WiU  Time  Increase  in  Greater  New  Yorkf  Discusses  the  increases 

between  1903  and  1913.    1913,  56  pp. 

Chamberlain,  New  York  City.  New  York  City*s  Administrative  Progress, 
1914-1916.  A  survey  of  various  departments  under  the  jurisdiction 
of  the  Mayor.  Conducted  under  the  direction  of  Henry  Bmere, 
Chamberlain,  May  1916,  351  pp.,  plates. 

CSuutor  Revision  Commission,  New  York  State.  Report  of  Committee 
on  Finance,  Oct.  2,  1900,  132  pp. 

Charter  Commission,  New  York  State,  1921.  Report  to  ihe  LegielaJture 
with  a  Draft  of  Charter  for  the  City  of  New  York.  March  5,  1923, 
340  pp.  Minority  Report  with  Proposed  Home  Rule  Charter,  sub- 
mitted by  C.  L.  Craig,  March  21,  1923,  30  pp. 

  Bepmi,  AniMial,  1902  to  1916. 

3fi2 


Financial  Administbaxion:  Bibliogbapht  353 


Cdffir,  Biid  Sim.  Financial  Ejfecte  of  ConsoUdation.  New  York,  1899, 
13  pp. 

Commissioner  of  Accounts,  New  Yorit  Qty.  Functional  Organusatum 
Charts  of  Departments,  Boards  and  Offices  Responsible  to  Ae  Mayor. 

1915,  26  charts. 

Commissioner  of  Accounts,  New  York  City  and  Bureau  of  Municipal 
Research  of  New  York.  Government  of  the  City  of  New  York,  A 
Swveyof  the  Organization  and  Functions,  Prepared  by  the  Constit^ 

Convention,  1915, 1343  pp.,  charts. 
Commissioners  of  the  Sinking  Fund,  New  Yorit  City .  Proceedings, 

to  date. 

Comptroller,  New  York  City.   Annual  Report,  1830  to  date. 

  Cost  of  Government  of  the  City  of  New  York,  with  an  Analysis  of 

the  Budget  for  1909;  Memorandum  Presented  by  H.  A.  Metz,  Decem- 
ber 24,  1908.   New  York  1909,  45  pp. 

  Comparatiee  Analytical  Tables  of  the  Bvdget  Appropriations,  1899- 

1908.   1908,50  pp. 
  ComparaHee  TMes  Classifying  and  Grouping  tiie  Budget  Appro- 
priations for  1908  and  1909.    1909,  46  pp. 
  Financing  the  City  of  New  York.   Two  lectures  Iqr  W.  A.  Pren- 

dergast,  Comptroller,  1916,  41  pp. 
  Manual  of  Accounting  and  Business  Procedure  of  the  City  [of  New 

York.    Issued  by  H.  A.  Metz,  Comptroller,  1909,  552  pp. 
Durand,  Edward  Dana.    Finances  of  New  York  City.    1898,  397  pp. 
Finance  D^nrtm^t,  New  York  City.    The  Business  of  New  York  City. 

How  ihe  City  gets  its  Money  and  How  U  Spends  It.   1911,  28  pp. 
  Ccmmunicaiion  of  ihe  Comptroller  .  .  .  in  rdaHon  to  the  Financial 

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N0V17I994  " 


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